DOI QR코드

DOI QR Code

Servitization and Manufacturing Firms' Performance: Korean Firm-Level Data Evidence

  • Received : 2022.12.02
  • Accepted : 2023.01.02
  • Published : 2022.12.30

Abstract

Does servitization improve manufacturing firms' performance, and in what condition? Following the seminal work of Crozet and Milet (2017), this study analyzes disaggregated firm-level data that covers 40,000 South Korean manufacturing firms surveyed by the Survey of Business Activities of Korea. We compute firm-level servitization intensity with available sales data of each firm by two-digit SIC sub-sectors. We find two novel empirical regularities: Korean servitization intensity distribution shows a very different shape from the French benchmark; Servitized firms tend to perform higher profitability and higher productivity than non-servitized firms.

Keywords

References

  1. Cho, J., Kim, Y. M., Yang, J. and I. Kim. 2018. "Analysis on Industrial Servicification and Its Implications." KIET Research Reports, no. 2018-33. Korea Institute for Industrial Economics & Trade. https://www.kiet.re.kr/research/redataView?redata_no=47 (in Korean)
  2. Crozet, M. and E. Milet. 2017. "Should everybody be in services? The effect of servitization on manufacturing firm performance." Journal of Economics & Management Strategy, vol. 26, no. 4, pp. 820-841.
  3. Cusumano, M. A., Kahl, S. J. and F. F. Suarez. 2015. "Services, industry evolution, and the competitive strategies of product firms." Strategic Management Journal, vol. 36, no. 4, pp. 559-575. https://doi.org/10.1002/smj.2235
  4. Fang, E., Palmatier, R. W. and Jan-Benedict Steenkamp. 2008. "Effect of Service Transition Strategies on Firm Value." Journal of Marketing, vol. 72, no. 5, pp. 1-14.
  5. Gebauer, H., Fleisch, E. and T. Friedli. 2005. "Overcoming the Service Paradox in Manufacturing Companies." European Management Journal, vol. 23, no. 1, pp. 14-26. https://doi.org/10.1016/j.emj.2004.12.006
  6. Kim, H., Kang, J., Keum, H. and J. Jung. 2021. "The Export Effect of Servitization in Manufacturing." KIEP Policy Analyses, no. 21-30. Korea Institute for International Economic Policy. (in Korean)
  7. Lanz, R. and A. Maurer. 2015. "Services and global value chains: Some evidence on servicification of manufacturing and services networks." WTO Working Paper, no. ERSD-2015-03, World Trade Organization, Economic Research and Statistics Division.
  8. Lee, S. 2022. "What Determines In-House Service Activities within Manufacturing Firms: Micro Evidence from Korea." Available in SSRN. http://dx.doi.org/10.2139/ssrn.4028816
  9. Levitt, T. 1972. "Production-Line Approach to Service." Harvard Business Review, September. https://hbr.org/1972/09/production-line-approach-to-service
  10. Miroudot, S. and C. Cadestin. 2017. "Services in Global Value Chains: From Inputs to Value-Creating Activities." OECD Trade Policy Papers, no. 197. OECD. https://doi.org/10.1787/465f0d8b-en
  11. Neely, A. 2008. "Exploring the Financial Consequences of the Servitization of Manufacturing." Operations Management Research, vol. 1, no. 2, pp. 103-118. https://doi.org/10.1007/s12063-009-0015-5
  12. Nordwall, A. 2016. "The Servicification of EU Manufacturing: Building Competitiveness in the Internal Market." National Board of Trade Sweden. https://www.kommerskollegium.se/publikationer/rapporter/2016/publikation-the-servicification-of-eu-manufacturing/
  13. Peters, B. 2009. "Persistence of innovation: stylised facts and panel data evidence." Journal of Technology Transfer, vol. 34, no. 2, pp. 226-243. https://doi.org/10.1007/s10961-007-9072-9
  14. Reinartz, W. J. and W. Ulaga. 2008. "How to Sell Services More Profitably." Harvard Business Review, May. https://hbr.org/2008/05/how-to-sell-services-more-profitably
  15. Vandermerwe, S. and J. Rada. 1988. "Servitization of business: Adding value by adding services." European Management Journal, vol. 6, no. 4, pp. 314-324. https://doi.org/10.1016/0263-2373(88)90033-3
  16. Visnjic, I., Wiengarten, F. and A. Neely. 2016. "Only the Brave: Product Innovation, Service Business Model Innovation, and Their Impact on Performance." Journal of Product Innovation Management, vol. 33, no. 1, pp. 36-52. https://doi.org/10.1111/jpim.12254
  17. Wooldridge, J. M. 2010. Econometric Analysis of Cross Section and Panel Data. (2nd ed.) Mass.: MIT Press.