The impact of digitalization and servitization on the financial performance of a firm: an empirical analysis

Abstract

Manufacturing firms have vigorously pursued opportunities for profitability and growth through servitization and digitalization processes. However, the current body of research provides contradictory results on the impact of servitization and digitalization on firm financial performance. This paper seeks to address how manufacturing companies can turn technology into business process transformation. To address this gap this paper develops and tests a framework for assessing the impact of servitization and digitalization on firm financial performance. This study analyses a survey of 185 U.S. and European manufacturing firms showing empirical evidence that digitalization and servitization had a direct positive effect on a firm’s financial performance. This research gives managers some insights to better understand the digital transformation in servitization process. These results also have significant theoretical implications to the servitization literature, since achieving superior bottom-line results is contingent on the integration of the digital and service-specific capabilities that reinvent the nature of an offering.

Keywords:

• Servitization
• digitalization
• firm performance
• structural equation modelling

Acknowledgment

We express our gratitude to the University of West London for the PhD Scholarship that made this research possible.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Additional information

Notes on contributors

Mohamad Abou-foul

Mohamad Abou-foul, PhD, MSc, BSc. Hons, is a Lecturer at University of West London, his research examines the role of servitization in driving competitive advantage, his research interests include strategy development, internet and digital economics, IoT and business transformation. He graduated from Computing, Engineering and Information Science school, and holds a PhD degree from University of West London, UK.

José L. Ruiz-Alba

José L. Ruiz-Alba, Ph.D., EMBA, PDG-IESE, SFHEA, is the Research Leader of the School of Management and Marketing of the University of Westminster and a Reader in Marketing (London, UK). He has more than 30 years of professional experience in different service areas: Law firm; Business Schools; Universities; Consultancy and Franchised Group of Quick Service Restaurants. He has broad teaching experience in more than 15 Universities. He has written over 60 academic journal articles, book chapters and conference papers. Member of Editorial Advisory Board of the Journal of Business and Industrial Marketing and Associate Editor of the International Journal of Internet Marketing and Advertising. He has received the best paper award from the Spring Servitization Conference (Manchester, May, 2016). He was Co-chair of the International Conference CBIM2018 and Guest Editor of a Special Issue for the Journal of Business and Industrial Marketing.

Anabela Soares

Anabela Soares PhD, MSc, BSc, FHEA is currently a Senior Lecturer in Strategy and Operations Management at the University of the West of England (UWE) and she is also the Programme Leader for the MSc in International Management. Her professional background includes management roles in the service industry, consultancy (manufacturing and services sector) and teaching in various UK institutions. She is a reviewer for various journals and she has published in international journals and conferences. Her research interests include Inter-Firm Relationships, Supply Chain Quality Management, Servitization and Gamification.