When does servitization promote product innovation?

Abstract

Although servitization has attracted heavy research attention, its impact on product innovation remains controversial. Addressing this gap, we examine the effects of servitization on exploitative innovation and exploratory innovation by integrating organizational knowledge creation theory and organizational inertia theory. We further explore how the effects vary with product modularization and organization formalization. We find that servitization has a positive relationship with exploitative innovation while a U-shaped relationship with exploratory innovation. Moreover, product modularization strengthens the U-shaped relationship between servitization and exploratory innovation; Organization formalization strengthens the positive relationship between servitization and exploitative innovation while weakens the U-shaped relationship between servitization and exploratory innovation. This study contributes to the literature by disentangling the impact of servitization on product innovation.