The relationship between digitalization and servitization

The role of servitization in capturing the financial potential of digitalization

Document identifier: oai:DiVA.org:ltu-77119
Access full text here:10.1016/j.techfore.2019.119804
Keyword: Engineering and Technology, Other Engineering and Technologies, Other Engineering and Technologies not elsewhere specified, Teknik och teknologier, Annan teknik, Övrig annan teknik, Digital servitization business model, Product-service systems (PSS), Smart manufacturing (Industry 4.0), Digitalization capabilities, Internet of Things (IoT), Customer relationship management (CRM), Entreprenörskap och innovation, Entrepreneurship and Innovation
Publication year: 2020
Relevant Sustainable Development Goals (SDGs):
SDG 10 Reduced inequalitiesSDG 8 Decent work and economic growth
The SDG label(s) above have been assigned by OSDG.ai

Abstract:

The present study investigates the effect of the interaction between digitalization and servitization on the financial performance of manufacturing companies. We challenge the simple linear assumption between digitalization and financial performance with a sample of 131 manufacturing firms and hypothesize a nonlinear U-shaped interaction effect between digitalization and servitization on financial performance. From low to moderate levels of digitalization, the interaction effect between digitalization and high servitization on company financial performance is negative and significant. From moderate to high levels of digitalization, the interplay between digitalization and high servitization becomes positive and significant, improving companies’ financial performance. The results demonstrate the need for an effective interplay between digitalization and servitization, the digital servitization. Without this interplay, a manufacturing company may face the paradox of digitalization. For managers of manufacturing companies, the study provides insights into the complex relationship between digitalization and financial performance, emphasizing the value of servitization in driving financial performance from digitalization. Thus, the study demonstrates how manufacturing companies can become data-driven by advancing servitization.

Authors

Marko Kohtamäki

University of Vaasa, School of Management / University of South-Eastern Norway, USN Business School, Vaasa, Finland
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Vinit Parida

Luleå tekniska universitet; Industriell Ekonomi; University of Vaasa, School of Management / University of South-Eastern Norway, USN Business School, Vaasa, Finland
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Pankaj C. Patel

Villanova School of Business, Villanova University, Villanova, PA, USA
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Heiko Gebauer

Department of Management and Engineering, Linköping University, Linköping, Sweden
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