Separate or Integrate? Assessing the Impact of Separation between Product and Service Business on Service Performance in Product Manufacturing Firms

Oliva R, H Gebauer, J Brann. 2012. Separate or Integrate? Assessing the impact of separation between product and service business on service performance in product manufacturing firms. Journal of Business to Business Marketing 19(4): 309-333. http://dx.doi.org/10.1080/1051712X.2012.647797

32 Pages Posted: 21 Nov 2011 Last revised: 14 Jul 2017

See all articles by Rogelio Oliva

Rogelio Oliva

Mays Business School, Texas A&M University

Heiko Gebauer

University of St. Gallen

Jeremy M. Brann

affiliation not provided to SSRN

Date Written: November 29, 2011

Abstract

Purpose: Investigating how the separation of the product and service business mediates the effect of management’s commitment to the service strategy on service performance in product manufacturing firms.

Methodology: We surveyed 216 European manufacturers in the high-value durable equipment industry moving into the service business. After assessing adequacy of measurement scales, we test statistically for mediation. Our results hold when replicating the study using a structural equation modeling approach and while testing for common method biases.

Findings: We find evidence that the creation of a separate service organization, organized as a profit center, has a significant positive mediating effect between managerial commitment and the services’ financial performance. While separation also has a positive mediating effect between commitment and non-financial performance, organizing services as a profit center had a negative effect on the service’s non-financial indicators.

Research limitations: a) Sample limited to German-speaking firms in the high-value durable equipment industry, b) measurements based on self-reported managerial perceptions of service performance, and c) conceptualization of service as a single strategic response.

Practical implications: While the complementarity between products and services is high in the market, our research suggests few synergies to leverage their integration inside the organization. Accordingly, management should, at least in transition efforts similar to the ones included in our sample, look into creating a separate and distinct service organization.

Value/Contribution: Research driven by practical concern on how to organize service operations in a manufacturing firm. Initial framing of the research through the creation of the construct of separation of product and service business.

Keywords: product-service transition, service strategy, organizational separation, empirical study

Suggested Citation

Oliva, Rogelio and Gebauer, Heiko and Brann, Jeremy M., Separate or Integrate? Assessing the Impact of Separation between Product and Service Business on Service Performance in Product Manufacturing Firms (November 29, 2011). Oliva R, H Gebauer, J Brann. 2012. Separate or Integrate? Assessing the impact of separation between product and service business on service performance in product manufacturing firms. Journal of Business to Business Marketing 19(4): 309-333. http://dx.doi.org/10.1080/1051712X.2012.647797. Available at SSRN: https://ssrn.com/abstract=1962818 or http://dx.doi.org/10.2139/ssrn.1962818

Rogelio Oliva (Contact Author)

Mays Business School, Texas A&M University ( email )

430 Wehner
College Station, TX 77843-4218
United States

Heiko Gebauer

University of St. Gallen ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

Jeremy M. Brann

affiliation not provided to SSRN ( email )

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