skip to content

Cambridge Service Alliance

At the forefront of service transformation in the digital era
 
December Paper - Buyers Dependence and Financial Performance

December 2017 Paper by Ornella Benedettini and Andy Neely on 'Does buyers’ dependen­­ce translate into financial performance? An empirical analysis of manufacturer-service provider relationships­­'

It may be beyond the capabilities of individual firms, or not be economically viable, to provide directly all the services related to a core product. For example, manufacturers of capital equipment often decide to supply services to certain customers/markets themselves, while also enabling distributors or other intermediaries to plan, install, integrate, support, optimise the product for the customer and provide product-related training. In such instances, the question arises of how should the manufacturer structure the ensuing supplier-buyer relationship with third-party providers of product-related services.

Drawing upon supply chain management (SCM) research and the theoretical lens of relational embeddedness, this study investigates the effects of a service provider’s “dependency” on a manufacturer’s financial performance in supplier-buyer relationships involving a servitized manufacturer and a third-party provider of product-related services. Using financial-statement-based data from 190 servitized manufacturer-service provider relationships, we find that a service provider’s dependency increases the manufacturer’s performance in terms of return-on-assets (ROA), return-on-sales (ROS) and asset turnover (ATO). However, as service provider dependency increases, the manufacturer experiences diminishing returns; as dependency increases beyond a certain, the negative outcomes offset benefits. Thus, overall, the study finds evidence of an inverted U-shaped relationship between a service provider’s dependency and a manufacturer’s financial performance.

[paper]

Cambridge Service Alliance

Welcome to the Cambridge Service Alliance…

  • A unique global alliance between the University of Cambridge and some of the world’s leading businesses.

  • Help organisations to address the challenges they will face in the next three to five years, through rigorous research, practical tools, insights and education programmes.

  • Learn how other innovative organisations are developing new services through our events

  • Since its inception in 2010 industrial partners have included CEMEX, GEA, IBM, Pearson, Zoetis, HCLTech, Bouygues UK among others.


CSA News

Lastest News.....