Exploring the relationship between product-service system and profitability

  • Andrea TenucciEmail author
  • Enrico Supino


Over the last few decades there has been a significant change in the economic output worldwide, and services have become more and more important. Manufacturers strengthen their competitive position by relying on service offerings, which has been referred to as “servitization”. A particular research stream within such framework recalls product service systems (PSS) as the integration of products and services to deliver value to the customer. The purpose of the paper is to examine the relationship between PSS categories and profitability. The empirical analysis uses a dataset of 10,051 companies on machinery manufacturing industry drawn from the ORBIS database. The analysis further considers the location of firms and differentiates between the European and BRIC countries. The findings reveal that profitability could be represented by an ideal bell curve if we consider on the horizontal axis a spectrum of PSS with an increasing servitization level. In fact, a higher profitability is expected for those companies offering central PSS categories (Product-Oriented, Service-Oriented and Use-Oriented PSS) in contrast to what happens for Integration-Oriented and Result-Oriented PSS categories which are closer, respectively, to the “pure product” and the “pure service” configurations extremes. Finally, considering the stage of economic development, the choice of offering Integrated-Oriented PSS brings to a better financial performance in BRIC countries, whereas, in the same setting, Use-Oriented PSS choice has a negative impact.


Servitization Product-service system, PSS Service offerings Profitability Financial performance 



  1. Alvizos, E., Angelis, J. What is Servitization anyway? POMS 21st Annual Conference, May 7 to May 10 2010, Vancouver, Canada. Retrieved January 19, 2014, from
  2. Baines, T. S., Bigdeli, A. Z., Bustinza, O. F., Shi, V. G., Baldwin, J., & Ridgway, K. (2016). Servitization: Revisiting the state-of-the-art and research priorities. International Journal of Operations & Production Management, 37(2), 256–278.CrossRefGoogle Scholar
  3. Baines, T., & Lightfoot, H. (2013). Made to serve: How manufacturers can compete through servitization and product service systems. Chichester: Wiley.Google Scholar
  4. Baines, T. S., Lightfoot, H. W., Benedettini, O., & Kay, J. M. (2009). The servitization of manufacturing. Journal of Manufacturing Technology Management, 20(5), 547–567.CrossRefGoogle Scholar
  5. Berger, S., & Lester, R. (1997). Made in Hong Kong (pp. 105–110). New York: Oxford University Press.Google Scholar
  6. Brax, S., & Visintin, F. (2017). Meta-model of servitization: The integrative profiling approach. Industrial Marketing Management, 60(1), 17–32.CrossRefGoogle Scholar
  7. Bustinza, O. F., Bigdeli, A. Z., Baines, T., & Elliot, C. (2015). Servitization and competitive advantage: The importance of organizational structure and value chain position. Research-Technology Management, 58, 53–60.CrossRefGoogle Scholar
  8. Chen, J. X. (2010). An empirical test of the effect of manufacturing service-orientation on corporate performance: A comparison between Chinese and American enterprises. Journal of Business Economics, 4, 33–41.Google Scholar
  9. Crozet, M., & Milet, E. (2017). Should everybody be in services? The effect of servitization on manufacturing firm performance. Journal of Economics & Management Strategy, 26, 820–841.Google Scholar
  10. Dachs, B., Biege, S., Borowiecki, M., Lay, G., Jäger, A., & Schartinger, D. (2013). Servitisation of European manufacturing: Evidence from a large scale database. Service Industries Journal, 34(1), 5–23.CrossRefGoogle Scholar
  11. Eggert, A., Hogreve, J., Ulaga, W., & Muenkhoff, E. (2011). Industrial services, product innovations, and firm profitability: A multiple-group latent growth curve analysis. Industrial Marketing Management, 40(5), 661–670.CrossRefGoogle Scholar
  12. Eggert, A., Hogreve, J., Ulaga, W., & Muenkhoff, E. (2014). Revenue and profit implications of industrial service strategies. Journal of Service Research, 17(1), 23–39.CrossRefGoogle Scholar
  13. Fang, E., Palmatier, R. W., & Steenkamp, J. B. E. M. (2008). Effect of service transition strategies on firm value. Journal of Marketing, 72(5), 1–14.CrossRefGoogle Scholar
  14. Fliess, S., & Lexutt, E. (2019). How to be successful with servitization—Guidelines for research and management. Industrial Marketing Management, 78, 58–75.CrossRefGoogle Scholar
  15. Frambach, R. T., Wels-Lips, I., & Gündlach, A. (1997). Proactive product service strategies: An application in the European health market. Industrial Marketing Management, 26(4), 341–352.CrossRefGoogle Scholar
  16. Gebauer, H. (2007). An Investigation of antecedents for the development of customer support services in manufacturing companies. Journal of Business-to-Business Marketing, 14(3), 59–96.CrossRefGoogle Scholar
  17. Gebauer, H. (2008). Identifying service strategies in product manufacturing companies by exploring environment strategy configurations. Industrial Marketing Management, 37(3), 278–291.CrossRefGoogle Scholar
  18. Gebauer, H., Bravo-Sanchez, C., & Fleisch, E. (2008). Service strategies in product manufacturing companies. Business Strategy Series, 9(1), 12–20.CrossRefGoogle Scholar
  19. Gebauer, H., Edvardsson, B., Gustafsson, A., & Witell, L. (2010). Match or mismatch. Journal of Service Research, 13(2), 198–215.CrossRefGoogle Scholar
  20. Gebauer, H., & Fleisch, E. (2007). An investigation of the relationship between behavioural processes, motivation, investments in the service business and service revenue. Industrial Marketing Management, 36(3), 337–348.CrossRefGoogle Scholar
  21. Gebauer, H., Fleisch, E., & Friedli, T. (2005). Overcoming the Service paradox in manufacturing companies. European Management Journal, 23(1), 14–26.CrossRefGoogle Scholar
  22. Gebauer, H., Joncourt, S., & Saul, C. (2016). Services in product-oriented companies: Past, present, and future. Universia Business Review, 49, 32–53.Google Scholar
  23. Gebauer, H., Ren, Guang-Jie, Valtakoski, A., & Reynoso, J. (2012). Service-driven manufacturing. Journal of Service Management, 23(1), 120–136.CrossRefGoogle Scholar
  24. Homburg, C., Fassnacht, M., & Guenther, C. (2003). The role of soft factors in implementing a service-oriented strategy in industrial marketing companies. Journal of Business-to-Business Marketing, 10(2), 23–51.CrossRefGoogle Scholar
  25. Hong, Y. P., Kim, Y., & Cin, B. C. (2015). Product-service system and firm performance: The mediating role of product and process technological innovation. Emerging Markets Finance and Trade, 51(5), 975–984.CrossRefGoogle Scholar
  26. Jacob, F., & Ulaga, W. (2008). The transition from product to service in business markets: An agenda for academic inquiry. Industrial Marketing Management, 37(3), 247–253.CrossRefGoogle Scholar
  27. Kohtamaki, M., Hakala, H., Partanen, J., Parida, V., & Wincent, J. (2015). The performance impact of industrial services and service orientation on manufacturing companies. Journal of Service Theory and Practice, 25(4), 463–485.CrossRefGoogle Scholar
  28. Kohtamäki, M., Partanen, J., Parida, V., & Wincent, J. (2013). Non-linear relationship between industrial service offering and sales growth: The moderating role of network capabilities. Industrial Marketing Management, 42(8), 1374–1385.CrossRefGoogle Scholar
  29. Kuijken, B., Gemser, G., & Wijnberg, N. M. (2017). Effective product-service systems: A value-based framework. Industrial Marketing Management, 60, 33–41.CrossRefGoogle Scholar
  30. Kwak, K., & Kim, W. (2016). Effect of service integration strategy on industrial firm performance. Journal of Service Management, 27(3), 391–430.CrossRefGoogle Scholar
  31. Lay, G., Copani, G., Jäger, A., & Biege, S. (2010). The relevance of service in European manufacturing industries. Journal of Service Management, 21(5), 715–726.CrossRefGoogle Scholar
  32. Lee, S., Yoo, S., & Kim, D. (2016). When is servitization a profitable competitive strategy? International Journal of Production Economics, 173(3), 43–53.CrossRefGoogle Scholar
  33. Lewis, M., Portioli Staudacher, A., Slack, N. (2004). Beyond products and services: Opportunities and threats in servitization. Paper presented at IMS Intl. Forum, Italy in Alvizos, E. & Angelis, J. What is Servitization anyway? POMS 21st Annual Conference, May 7 to May 10 2010, Vancouver, Canada. Retrieved January 19, 2014, from
  34. Li, J. H., Lin, L., Chen, D. P., & Ma, L. Y. (2015). An empirical study of servitization paradox in China. Journal of High Technology Management Research, 26, 66–76.CrossRefGoogle Scholar
  35. Li, H., Tian, G., & Tian, Y. (2018). Servitization: Its preferred organization and impact on firm performance. Human Systems Management, 37, 181–193.CrossRefGoogle Scholar
  36. Lin, Y., Luo, J., Ieromonachou, P., Rong, K., & Huang, L. (2019). Strategic orientation of servitization in manufacturing firms and its impacts on firm performance. Industrial Management & Data Systems, 119(2), 292–316.CrossRefGoogle Scholar
  37. Mathieu, V. (2001a). Service strategies within the manufacturing sector: Benefits, costs and partnership. International Journal of Service Industry Management, 12(5), 451–475.CrossRefGoogle Scholar
  38. Mathieu, V. (2001b). Product services: From a service supporting the product to a service supporting the client. Journal of Business & Industrial Marketing, 16(1), 39–58.CrossRefGoogle Scholar
  39. Min, L. X., Wang, J. Q., & Luo, Q. (2015). Does the servitization strategy improve the performance of manufacturing enterprises in China? American Journal of Industrial and Business Management, 5, 281–287.CrossRefGoogle Scholar
  40. Neely, A. (2008). Exploring the financial consequences of the servitization of manufacturing. Operations Management Research, 1(2), 103–118.CrossRefGoogle Scholar
  41. Neely, A. (2013). Servitization in Germany: An international comparison. Cambridge: University of Cambridge.Google Scholar
  42. Neely, A., Benedettini, O., Visnjic, I. (2011). The servitization of manufacturing: Further evidence. Paper presented at the EurOMA 2011 conference of European operations management association, Cambridge, UK.Google Scholar
  43. Neu, W. A., & Brown, S. W. (2005). Forming successful business-to-business services in goods-dominant firms. Journal of Service Research, 8(1), 3–17.CrossRefGoogle Scholar
  44. Oliva, R., & Kallenberg, R. (2003). Managing the transition from products to services. International Journal of Service Industry Management, 14, 160–172.CrossRefGoogle Scholar
  45. Partanen, J., Kohtamaki, M., Parida, V., & Joakim, W. (2017). Developing and validating a multi-dimensional scale for operationalizing industrial service offering. Journal of Business & Industrial Marketing, 32(2), 295–309.CrossRefGoogle Scholar
  46. R Development Core Team. (2008). R: A language and environment for statistical computing. Vienna: R Foundation for Statistical Computing. ISBN 3-900051-07-0
  47. Rabetino, R., Harmsen, W., Kohtamäki, M., & Sihvonen, J. (2018). Structuring servitization-related research. International Journal of Operations & Production Management, 38(2), 350–371.CrossRefGoogle Scholar
  48. Sakao, T., & Shimomura, Y. (2007). Service CAD system to support servicification of manufactures. In S. Takata & Y. Umeda (Eds.), Advances in life cycle engineering for sustainable manufacturing businesses. London: Springer.Google Scholar
  49. Schmenner, R. W. (2009). Manufacturing, service, and their integration: Some history and theory. International Journal of Operations & Production Management, 29(5), 431–443.CrossRefGoogle Scholar
  50. Schmitt, R., & Hatfield, S. (2008). Strategic servicification—A quality based approach beyond service-engineering. In M. Mitsuishi, K. Ueda, & F. Kimura (Eds.), Manufacturing systems and technologies for the new frontier. London: Springer.Google Scholar
  51. Schwab, K. (Ed.). (2016). The global competitiveness report 2016–2017. Geneva: The World Economic Forum.Google Scholar
  52. Slack, N. (2005). Operations strategy: Will it ever realize its potential? Gestão & Produção, 12(3), 323–332. In: E. Alvizos. & J. Angelis (Eds.). What is Servitization anyway? POMS 21st Annual Conference, May 7 to May 10 2010, Vancouver, Canada. Retrieved January 19, 2014, from
  53. Spring, M., & Araujo, L. (2009). Service, services and products: Rethinking operations strategy. International Journal of Operations and Production Management, 29, 444–467.CrossRefGoogle Scholar
  54. Suarez, F. F., Cusumano, M. A., & Kahl, S. J. (2013). Services and the business models of product firms: An empirical analysis of the software industry. Management Science, 59(2), 420–435.CrossRefGoogle Scholar
  55. Szász, L., Demeter, K., Boer, H., & Cheng, Y. (2017). Servitization of manufacturing: The effect of economic context. Journal of Manufacturing Technology Management, 28(8), 1011–1034.CrossRefGoogle Scholar
  56. Tukker, A. (2004). Eight types of product-service system: Eight ways to sustainability? Experiences from SusProNet. Business Strategy and the Environment, 13(4), 246–260.CrossRefGoogle Scholar
  57. Tukker, A. (2015). Product services for a resource-efficient and circular economy—A review. Journal of Cleaner Production, 97, 76–91.CrossRefGoogle Scholar
  58. Tukker, A., & Tischner, U. (2008). Product-services as a research field: past, present and future. Reflection from a decade of research. Journal of Cleaner Production, 14, 1152–1156.Google Scholar
  59. Vandermerwe, S., & Rada, J. (1988). Servitization of business: adding value by adding services. European Management Journal, 6(4), 314–324.CrossRefGoogle Scholar
  60. Visintin, F. (2014). Photocopier industry: At the forefront of servitization. In G. Lay (Ed.), Servitization in industry (pp. 23–45). Berlin: Springer.Google Scholar
  61. Visnjic Kastalli, I., & Van Looy, B. (2013). Servitization: Disentangling the impact of service business model innovation on manufacturing firm performance. Journal of Operations Management, 31, 169–180.CrossRefGoogle Scholar
  62. Visnjic, I., Neely, A., Wiengarten, F. (2012). Another performance paradox?: A refined view on the performance impact of servitization (July 4, 2012). ESADE Business School Research Paper No. 231.Google Scholar
  63. Visnjic, I., Van Looy, B., & Neely, A. (2013). Steering manufacturing firms towards service business model innovation. California Management Review, 56(1), 100–123.CrossRefGoogle Scholar
  64. Visnjic, I., Wiengarten, F., & Neely, A. (2016). Only the Brave: Product innovation, service business model innovation, and their impact on performance. Journal of Product Innovation Management, 33(1), 36–52.CrossRefGoogle Scholar
  65. White, A. L., Stoughton, M., Feng, L. (1999) Servicizing: The quiet transition to extended product responsibility. U.S Environmental Protection Agency Office of Solid Waste. Retrieved January 19, 2014, from
  66. Wise, R., & Baumgartner, P. (1999). Go downstream: The new profit imperative in manufacturing. Harvard Business Review, 77(5), 133–140.Google Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Institute of ManagementScuola Superiore Sant’Anna di PisaPisaItaly
  2. 2.Department of ManagementUniversity of BolognaBolognaItaly

Personalised recommendations