خدمات صنعتی، نوآوری محصول، و سودآوری شرکت: تجزیه و تحلیل منحنی رشد نهفته چند گروهی

Manufacturers in many industries seek service-led growth beyond their product core. Yet research on the link between service revenue growth and firm profitability is still at an early stage. To shed further light on this complex relationship, we report the results of a longitudinal study based on panel data of 414 companies in the German mechanical engineering industry collected over a five-year period. Employing latent growth curve modeling and using multiple group analysis, the study provides empirical evidence for the causality between service infusion strategies and manufacturers' profit trajectories. The results also reveal differential effects of service categories and the moderating role of manufacturers' product innovation efforts. For companies with high product innovation activity, services supporting the product (SSPs) directly increase firm profitability, while services supporting the clients' actions (SSCs) do not display any link with long-term profitability. Conversely, for companies with low product innovation activity, SSCs have a significant, positive effect on firm profitability, while SSPs have only an indirect effect. In sum, our findings caution managers that service offerings do not automatically improve company profits. Manufacturers must carefully consider the fit between their service offerings and product innovation activities to grow bottom line results.

In recent years, many industrial suppliers seek to grow beyond their traditional core product business by developing ancillary service offerings and value-added solutions (Evanschitzky, v. Wangenheim, & Woisetschläger, 2011). From a managerial perspective, there are straightforward economic reasons that goods-dominant companies increasingly venture into services. In business markets, in which manufacturers heavily rely on an installed base, substantial revenues and profits can be derived from services over the product life cycle (Potts, 1988). Service revenues typically display healthy profit margins that serve as compensation for declining revenues and profitability in equipment sales (Cohen et al., 2006 and Reinartz and Ulaga, 2008). In addition, services stabilize cash flows and provide increased visibility of revenue streams, a key benefit in times of economic downturns (Anderson, 2008). In summary, extant literature assumes that growing the service portion within overall revenues leads to increased firm profitability (Wise & Baumgartner, 1999). In general, managers and scholars agree about the fundamental benefits of moving towards services. Yet increasing anecdotal evidence also reveals that results are often mixed at best. For example, according to a Bain & Co. study, only 21% of companies succeed with service strategies (Baveja, Gilbert, & Ledingham, 2004). Product companies that enter service markets often cannot outperform their pure product counterparts in terms of revenue growth, profit margins, and returns on equity. In a similar vein, Stanley and Wojcik (2005) find that approximately 50% of all solution providers realize only modest benefits, and 25% actually lose money with value-added services and solution offerings. These insights gained from managerial literature are highly valuable. However, empirical research on the link between service revenue growth and overall firm profitability in manufacturing industries is still at an early stage, and many questions require further investigation. For example, while several studies confirm a positive effect of services on manufacturers' sales and revenues (e.g., Antioco et al., 2008, Gebauer, 2007 and Homburg et al., 2003), Fang, Palmatier, and Steenkamp (2008) show that this is not true under all circumstances. Furthermore, with a few exceptions, most empirical investigations of industrial services treat services as a homogeneous entity. Yet evidence suggests that scholars must take a more fine-grained perspective to understand how different service categories relate to firm profitability in business markets (Antioco et al., 2008 and Mathieu, 2001a). Thus, in this study, we build on Mathieu's (2001a) distinction between services supporting the product (SSPs) and services supporting the clients' actions (SSCs) to investigate how these categories affect companies' profits. Finally, extant literature emphasizes moderator variables that affect performance outcomes of service growth strategies in manufacturing firms. In particular, scholars identify industry characteristics and firm characteristics as important moderators (Antioco et al., 2008, Fang et al., 2008, Gebauer, 2007 and Homburg et al., 2003). Yet prior research does not account for the interplay between established product strategies and emerging service initiatives. Indeed, manufacturers' service infusion strategies pose a unique challenge: manufacturers must incorporate service activities into their existing product-based business model rather than transition from one to the other (Ostrom et al., 2010). This implies that product and service activities compete for limited resources (e.g., management attention) within the same company. We assume that the extent to which resource conflicts between product and service activities exist depends on the focus on product innovation activities within a company. The product innovation activity reflects the extent to which companies compete on the basis of product superiority to differentiate from competition (Rangan & Bowman, 1992).When companies stress product innovation activities and therefore allocate their resources to the product domain, limited resources remain for managing the service business. In turn, firms with a strategic focus on product innovation activities will lack necessary resources to enhance the efficiency and effectiveness of the service business and thus find it more difficult to reap the benefits of their service business. This study contributes to marketing research and practice in three ways. First, employing longitudinal panel data, this study analyzes long-term effects of industrial service offerings. By probing the underlying direction of causality, we contribute to the growing literature on the outcomes of service infusion strategies. Second, taking a more fine-grained view of industrial services, we underline their heterogeneity and uncover their differential effects on company performance. Third, this study enhances the understanding of conditions under which industrial services result in long-term profit growth for manufacturing companies. In particular, our findings show that manufacturing companies can enhance profitability with industrial services when they account for the interplay between service offerings and product innovation activities. In doing so, our study helps managers to decide on which service types they need to focus according to their level of product innovation activity and, in turn, how resources should be allocated. We organize this article as follows: we first review the extant literature and develop our hypotheses. We then report on the results of a longitudinal study based on panel data of 414 companies in the German mechanical engineering industry collected over a five-year period. Employing a latent growth curve modeling (LGCM) approach (Duncan, Duncan, & Strycker, 2006), we analyze the causal relationship between the two service types and companies' profit trajectory. We measure the moderating influence of product innovation activity using multiple group analysis. Finally, we discuss academic and managerial implications and provide directions for future research.

For manufacturing firms, the infusion of services poses a unique challenge. To be successful in competitive markets, suppliers of industrial products have fit their critical resources to the specific requirements of the goods-based logic. Yet, with the increasing importance of services as a competitive weapon, these same suppliers need to develop and integrate a new set of resources and capabilities for marketing industrial services. These additional requirements are likely to fuel organizational conflicts. Against the background of limited company resources, manufacturing firms risk losing their strategic focus if they do not manage the transition properly (Fang et al., 2008). Our research sheds light on the interplay between manufacturers' product innovation and service activities. More specifically, we argue that firms must align the type of services offered to their product innovation activities to effectively increase long-term profitability. By exploring the impact of service infusion on the profitability of manufacturing firms, our research offers several methodological, measurement, and managerial insights. From a methodological perspective, our research provides guidelines on how firms can analyze the long-term effects of managerial actions by employing LGCM as a powerful estimation approach. Recently, scholars have called for additional research on the long-term impact of marketing efforts (Leeflang et al., 2009). In response, we show that LGCM helps disentangle the effect of marketing activities on the baseline and the developmental trajectory of company performance. Our study unveils positive effects of industrial service offerings on firms' profit trajectories. Thus, we also provide empirical evidence for the assumed causality between industrial service offerings and firm profitability. In contrast with cross-sectional correlations, which would not rule out the possibility of a reversed chain of effects (i.e., higher profits enable companies to develop more services), our study provides a stronger test for the underlying direction of causality. Given the importance of truly understanding the direction of causality for both marketing managers and researchers, we encourage further empirical research applying the LGCM approach in the marketing domain. From a measurement perspective, we find that outcomes of industrial services differ among service types. Building on Mathieu's (2001a) classification, we distinguish between two fundamental industrial service types: SSPs and SSCs. Both service types differ with respect to their impact on long-term profit. Thus, our findings highlight the importance of adopting a fine-grained view when researching the impact of the service infusion on manufacturing firms. From a managerial point of view, we show that industrial services can help manufacturing companies enhance their long-term profitability. However, our findings also indicate that industrial service offerings do not automatically improve company profits. Rather, profit outcomes of the service infusion depend on the fit between service offerings and companies' product innovation activity. It is worth mentioning that SSPs and SSCs do not have a significant effect on long-term profitability when we neglect the level of product innovation and treat all sampled companies as homogeneous entities. Thus, our study highlights the need to account for heterogeneity among manufacturing companies and may help explain mixed anecdotal evidence for the profit impact of the service infusion. To effectively enhance long-term profitability, companies need to focus on the “right” service offering depending on their level of product innovation activities. Fig. 3 summarizes the two strategic positions and identifies the corresponding effects of SSPs and SSCs on firms' long-term profitability.When companies exhibit low product innovation activities, both service types contribute to their long-term profits. In this setting, opportunities for differentiation based on superior products are limited (Reimann, Schilke, & Thomas, 2010) and innovative and knowledge-based SSCs become a primary means of differentiation. Thus, for companies with low innovation activity, SSCs can help them gain a competitive advantage and, in turn, contribute to their long-term profit. Conversely, SSPs can build basic knowledge on the provision of services and thereby encourage organizational learning. Offering SSPs helps companies extend their SSC business and thereby increase their long-term profits in an indirect way. In contrast, companies with high product innovation activities should carefully consider their slack resources before investing in complex services. When offering innovative products, companies face the challenge of coping with buyers' uncertainty about the advantages of different market offerings, sustainability of the product, and internal changes necessary to implement the product (Suarez, Cusumano, & Kahl, 2008). In this context, SSPs can “act as important knowledge-transfer mechanisms between a firm and its potential customers and thus lower the latter's reluctance to adopt the new products” (Suarez et al., 2008, p. 5). Thus, when product innovation activity is high and products serve as major sources of differentiation, firms can use SSPs to support product sales and thereby enhance long-term profit. The deployment of more complex SSCs, however, requires substantial resource investments that may be difficult to obtain in a company with a history of successful product innovations. Because SSCs may amplify resource conflicts within the firm and add to the risk of losing strategic focus, they do not have a significant impact on long-term profitability in our sample of manufacturing companies.