The Servitization of Manufacturing: an Anlsysis of Global Trends

Manufacturing in developed economies is under massive pressure. Swaths of industrial sectors have been lost to the emerging economies in the Middle and Far East. Commentators have advocated that manufacturing firms in developed economies should respond by moving up the value chain, seeking to innovate and create more sophisticated products and services so that they do not have to compete on the basis of cost alone (Porter and Ketels, 2003). While this strategy is proving increasingly popular with policy makers and academics there is limited empirical evidence exploring whether it is being adopted in practice. And if so, what the impact of this “servitization” of manufacturing might be. This paper seeks to fill a gap in the literature by presenting international empirical evidence on the range and extent of servitization. Data are drawn from the OSIRIS database on 10,078 firms incorporated in 23 different countries. The paper presents an initial analysis of these data which suggests that: [i] there are significant differences between countries in terms of the extent to which manufacturing has servitized – servitization is most prevalent in the US and least prevalent in China; [ii] there are twelve different forms of service offering that manufacturing firms adopt and [iii] there is evidence that larger firms, measured both in terms of number of employees and turnover, are more likely to servitize. Clearly, given the richness of the data set on which this paper is based, further work is both feasible and desirable.