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 the interdependency between servitization and digitalization and how they enhance operations and the business bottom line, it also addresses 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, in terms of revenue generation, profit and market value. This research gives managers some insights to better understand the digital transformation role in enhancing the 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, this enables a manufacturing firm and its customers to operate radically better than before.

Product lifespan: the missing link in servitization

“…Their conclusions follow the lines of the study by Li, Liu, and Bustinza (2018), which confirms that more service-intensive manufacturing sectors tend to increase their international performance. Lafuente et al (2017), in turn, conclude that sectors with greater collaboration with knowledge-intensive business service (KIBS) providers increase performance, while Vendrell-Herrero, Bustinza, and Opazo-Basaez (2020) provide evidence that this performance is greater in manufacturing firms that have undergone a digital transformation and made intensive use of information and communication technologies (Abou-Foul et al 2020).…”

Crisis Preparedness of Healthcare Manufacturing Firms during the COVID-19 Outbreak: Digitalization and Servitization

“…This study measured servitization based on the survey items of Abou-foul et al [65]. Servitization was measured based on six items, including the alignment of organizational structure with strategy, servitized offering, top management team support, and employee training.…”

“…The measurement of digitalization was based on Abou-foul et al [65]. Specifically, this study measured digitalization of manufacturing firms using eight items, including the use of digital technologies in understanding customer needs, marketing and selling products and services through digital channels, using digital technologies in operational processes, using analytical tools for operational decision making, and launching new business models based on digital technologies.…”

Development of a system for statistical measurement of the influence of digital technologies on the efficiency of management

“…The cited study is useful even nationwide because it makes it possible to choose industries that should be supported by subsidization. Similarly to the previous study, work [9] reports an assessment of the impact of digitalization on the financial results of the company. Another approach to measuring the impact of digital technologies is considered in [10].…”