Supply chain concentration, digitalization and servitization of manufacturing firms

Abstract

PurposeDigitalization and supply chain collaboration are central to the successful servitization of manufacturing firms. However, how digitalization interacts with supply chain structure to affect servitization decisions in manufacturing firms has been understudied. In this study, we bridge resource dependence theory (RDT) and information processing theory (IPT) to examine how supply chain concentration interacts with digitalization to affect servitization decisions in manufacturing firms.Design/methodology/approachWe tested the hypotheses using a panel dataset of 1,261 publicly listed machinery manufacturing firms in China. We addressed the endogeneity concerns using the control function approach and conducted multiple tests to ensure the robustness of the results.FindingsWe find that both supplier and customer concentration are negatively related to servitization, indicating that concentrated supplier and customer bases are hindrances to manufacturing servitization. Digitalization weakens the negative impact of customer concentration on servitization, but it strengthens the negative impact of supplier concentration on servitization.Originality/valueThe findings extend our understanding of supply chain structure and digitalization as determinants of servitization. This research also offers a nuanced view of how digitalization mitigates the negative impacts of supply chain concentration.