Service business development in small and medium capital goods manufacturing companies

Abstract

Purpose The purpose of this paper is to focus on how small‐ and medium‐sized enterprises (SMEs) from the capital goods manufacturing sector develop the service business. Assuming the service business development depends on contingency factors, the paper aims to explore how SMEs align external environment, strategy and organizational design. Design/methodology/approach A multi‐case study design on capital goods manufacturers from Italy, Sweden and Switzerland was employed. Findings Service strategy formation and implementation in SMEs depend on their value chain position and the business environment. Suppliers with few customers selling directly to customers increasingly offer logistic and repair services as well as R&D‐oriented services. In contrast, OEMs selling through distributors do not primarily extend the services offered, but rather reconsider service process configuration together with distributors. Altogether, the paper describes four different service responses to specific combinations of value chain position and business environment. Research limitations/implications The findings are limited to the capital goods manufacturing industry. Originality/value Whereas previous research neglects how SMEs develop the service business, this article offers key insights in the interrelationship among the value chain position and the business environment as well as the service strategy formation and implementation.