The Effect of Product Complexity on Servitization and Deservitization: A Multi-Country Quantitative Analysis

Abstract

Servitization is often based on technology, with the producer not selling products but rather offering product-related services. While servitization had been steadily gaining interest until relatively recently, a new trend called deservitization, the outsourcing of service provision, has seen a slow uptake in the scientific literature. This work analyses why servitization is not always beneficial. We analyze the effect of product complexity on servitization and deservitization in three Southern European countries. Due to high competition and knowledge leaking, manufacturers of complex products tend to servitize with their own resources, thus avoiding deservitization or outsourcing of service provision. The analysis is performed using two-step OLS regression. The results confirm that the hypotheses and the model are significant and that manufacturers of simple products tend to deservitize, while manufacturers of complex products tend to servitize. Managerial implications refer to alternatives as to when to enter the servitization arena and when it is more beneficial to deservitize

This research was funded by the Croatian Science Foundation, grant number O-1861- 2014—3535 Building competitiveness of Croatian Manufacturing. The authors also acknowledge the financial support from the Slovenian Research Agency (Research Core Funding No. P2-0190)