This paper extends the original service profit chain by examining the role of relational capabilities with employees, customers and strategic partners on process and performance outcomes in a business-to-business context. More specifically, we demonstrate how satisfied and loyal employees are better in developing relationships with customers and strategic partners. These relationships enable firms to be more responsive towards customers and become more innovative, which increase customer satisfaction and loyalty and, ultimately, financial performance. Our results provide support for the development of relational capabilities in a business-to-business environment by extending the service profit chain (SPC) model. However, we find that while the development of strong customer relationships contributes to an improved service responsiveness of the firm, strategic partners do not.
The search for competitive advantage has led to the development of the resource-based view (RBV) of the firm, which aims at explaining performance differences through resources and competencies the firm possesses; (Barney, 1991 and Wernerfelt, 1984). According to the RBV firm resources and competencies are meant to be valuable, rare, and inimitable and non-substitutable in order for the firm to create a competitive advantage, and hence, successfully compete in its environment. Despite its popularity, the resource-based view of the firm has been criticized for being tautological (Priem & Butler, 2001) and not widely adopted in marketing due to the lack of definition as to what constitutes a resource (Srivastava, Fahey, & Christensen, 2001). Further, individual firms are becoming increasingly more connected and hence rely on resources beyond those found in their own boundaries, which are only implicitly considered in the RBV (Srivastava et al., 2001). Therefore, relational resources that span firm boundaries have been identified as being critical for understanding competitive advantage (Dyer & Singh, 1998).
Although according to classic economic and management theory the firm has distinct boundaries (Gummesson, 1999), the value of relationships and networks, is widely recognized by the strategic management and marketing literature (Gulati, 1995 and Ring and Van de Ven, 1992). Since the 1980s, the Industrial Marketing and Purchasing (IMP) Group scholars were among the first to contribute towards a theory of inter-organizational relationships and networks. According to the IMP, relationships are resources and investments (Asanuma, 1989) that are managed and leveraged, both, internally and externally. Internally, the transformation processes of employee knowledge and skills into organizational capabilities (Levinthal & March, 1993) are critical for the competitiveness and survival of an organization through the development of innovations and effective dynamic capabilities (Day, 1994 and Dickson, 1996). Relationships developed with external parties, such as customers and strategic partners, have also proven to be important sources of knowledge and know-how capabilities (Kale, Singh, & Perlmutter, 2000) and therefore have the potential of enhancing innovativeness. As a result, firms are valued higher depending on the quality and quantity of their relationships (Powell, 1996).
Given the limitations of the RBV, Srivastava et al. (2001) developed the relational and intellectual market-based assets in order to further advance the integration of RBV and marketing. These market-based assets have sharpened the focus for marketing theorists towards intangible, dynamic and operant resources (Madhavaram and Hunt, 2008 and Vargo and Lusch, 2004). However, these conceptualizations treat these intangible, operant resources on the same level, without providing any guidance on how these resources interact with each other, and how they should be leveraged for value creation. In contrast, the well-known service profit chain (SPC) framework from Heskett, Jones, Loveman, Sasser, and Schlesinger (1994) provides guidance about the interrelationships among operational investments, customer perceptions and the bottom line (Kamakura, Mittal, de Rosa, & Mazzon, 2002). This “linear chain” is fairly straightforward in its implications, and it has been validated by a number of empirical studies from consumer service industries (Athanassopoulos, 1999, Kamakura et al., 2002, Roth and Jackson, 1995 and Soteriou and Zenios, 1999). However, no study has examined its applicability in business-to-business environments and similarly to the RBV it examines operational resources that are internal to the firm. This indicates the need to apply the SPC in a business context, but also enhance it in a manner that considers external relationship capabilities and their effect not only on customer performance, but innovativeness as well.
This paper aims at advancing our knowledge of value creation in business-to-business markets by integrating the relational view and market-based assets on the SPC framework. This research contributes by i) applying the service profit chain in a business-to-business context, ii) incorporating the impact of external relational capabilities with customers and strategic partners, and iii) examining organizational innovativeness as a source of renewal in the value creation process.
The paper is organized as follows. First we present the theoretical frameworks that are used in this study in more detail and then introduce our model and working hypotheses. Subsequently, the empirical study will be introduced by testing our model and hypotheses. Results are then presented, implications discussed and future research directions suggested.
