Exploring Antecedents of Service Innovation Excellence in Manufacturing SMEs RM/16/025 Exploring Antecedents of Service Innovation Excellence in Manufacturing SMEs

Servitization is a process of creating value by shifting from merely selling products to selling solutions that integrate products and services. It is a strategy often used by manufacturing SMEs to avoid or escape the commodity trap. Research has illustrated that servitization can lead to a competitive advantage in the marketplace, but many SMEs still fail to servitize successfully. In this paper, we discuss factors that enable SMEs to achieve service innovation excellence. Using a knowledge based-perspective, we posit that absorptive capacity, which is the ability to identify, assimilate and exploit external knowledge, is one of these critical factors. Additionally, we investigate the effect of two potential drivers that can influence absorptive capacity, namely employee collaboration and an SME’s search breadth. Our findings, resulting from survey research on a sample of Dutch manufacturing SMEs, confirm that employee collaboration and search breadth have a positive effect on the organization’s absorptive capacity, which in turn is a driver of service innovation excellence. These results have implications for theory development on servitization and provide SMEs with insights on how to successfully servitize.