When does servitization promote product innovation? The moderating roles of product modularization and organization formalization

Abstract

Although servitization has attracted substantial research attention, its impact on product innovation remains controversial. Addressing this gap, we examine the effects of servitization on exploitative and exploratory innovations by integrating organizational knowledge creation theory and organizational inertia theory. We further explore how these effects vary with product modularization and organization formalization. We find that servitization has a positive relationship with exploitative innovation and a U-shaped relationship with exploratory innovation. We also find that product modularization strengthens the U-shaped relationship between servitization and exploratory innovation. Meanwhile, organization formalization is shown to strengthen the positive relationship between servitization and exploitative innovation but weaken the U-shaped relationship between servitization and exploratory innovation. This study contributes to the literature by disentangling the effects of servitization on product innovation.