The performance impact of industrial services and service orientation on manufacturing companies

Purpose - Product-manufacturing firms are increasingly positioning themselves as providers of industrial services and solutions. Despite the increasing conceptual interest in industrial services, empirical evidence about the factors that mediate the relationships between industrial services and firm performance remains limited. The purpose of this paper is to investigate the relationship between industrial service offerings, service orientation and firm sales and profit performance. Design/methodology/approach - The study uses data from 115 manufacturing firms and adopts a structural equation modeling technique to test a set of hypotheses on service offerings, service orientation and company sales and profit performance. Findings - The results underline the importance of implementing service orientation in employees' behavior, recruitment, training, and assessment. Service orientation is demonstrated as an essential mediator for the relationship between service offerings, revenues, and profits. The results therefore suggest that both service offerings and service orientation are important when manufacturing companies attempt to position themselves as industrial service providers. Research limitations/implications - Given the limitations of the sample collected from the Finnish manufacturing industry, future studies could refine the measures and investigate the applicability of the results in other contexts. Practical implications - The results suggest that developing a service orientation is vital for manufacturing companies to profit from increased offerings of industrial services. Because nurturing service orientation is a central enabler of the impact of service offerings on sales and profit performance, it is in the interests of manufacturing firms moving towards a servitized business model to develop training, compensation, and recruitment policies. Originality/value - The study establishes a link between service offerings, service orientation, sales, and profit performance in manufacturing firms. This is among the first studies to provide statistical evidence to support claims that even manufacturing firms can benefit from developing integrated product-service solutions.