How Does Servitization Affect Firm Performance?

Servitization by manufacturing firms has been a growing trend in recent years. However, the literature is unclear on whether servitization improves firm performance. Using survey data from 334 Chinese manufacturing firms, we examine how servitization affects firm performance. We also investigate the contingent role of platform-based innovation. Our results show that servitization enhances latent needs identification and worsens dominant logics conflict. Platform-based innovation is effective in mitigating harm from dominant logics conflict, but it also limits the transfer of latent customer needs. This article contributes to the literature by identifying underlying mediating effects between servitization and firm performance to explain how servitization affects firm performance. The findings also address the “service paradox.”