Exploring the relationship between product-service system and profitability

Over the last few decades there has been a significant change in the economic output worldwide, and services have become more and more important. Manufacturers strengthen their competitive position by relying on service offerings, which has been referred to as “servitization”. A particular research stream within such framework recalls product service systems (PSS) as the integration of products and services to deliver value to the customer. The purpose of the paper is to examine the relationship between PSS categories and profitability. The empirical analysis uses a dataset of 10,051 companies on machinery manufacturing industry drawn from the ORBIS database. The analysis further considers the location of firms and differentiates between the European and BRIC countries. The findings reveal that profitability could be represented by an ideal bell curve if we consider on the horizontal axis a spectrum of PSS with an increasing servitization level. In fact, a higher profitability is expected for those companies offering central PSS categories (Product-Oriented, Service-Oriented and Use-Oriented PSS) in contrast to what happens for Integration-Oriented and Result-Oriented PSS categories which are closer, respectively, to the “pure product” and the “pure service” configurations extremes. Finally, considering the stage of economic development, the choice of offering Integrated-Oriented PSS brings to a better financial performance in BRIC countries, whereas, in the same setting, Use-Oriented PSS choice has a negative impact.