Servitization: allowing better solution delivery and performance for manufacturers of longer lifespan products

Abstract

Manufacturers are shifting the traditional transactional paradigm by delivering customizedsolutions in a process known as servitization. This study proposes that the competitiveperformance of servitization is higher for firms selling long-lifespan products as they enablebetter customization cost recovery. To test this hypothesis, we analyse the moderating role ofproduct lifespan on the servitization-performance relationship. Through merging a uniquesurvey of Manufacturing Multinational Enterprises (MMNEs) and the Lifespan Database forVehicles, Equipment and Structures (LiVES) a unique sample is created. Analysis of the datashows a positive relationship between servitization and performance. This relationship becomessignificantly stronger for MMNES that sell long-lifespan products. Our findings are robust forcorrelation, regression and structural equation modelling analyses. This study explains whyservitization boosts performance in some industries but has a neutral effect on others. Byincluding product lifespan in the equation, we improve understanding of why servitization is anexcellent mechanism for asset management in industrial relationships.