Separate or Integrate? Assessing the Impact of Separation between Product and Service Business on Service Performance in Product Manufacturing Firms

Purpose: Investigating how the separation of the product and service business mediates the effect of management's commitment to the service strategy on service performance in product manufacturing firms. Methodology: The authors surveyed 216 European manufacturers in the high-value durable equipment industry moving into the service business. After assessing adequacy of measurement scales, the authors tested statistically for mediation. Their results hold when replicating the study using a structural equation modeling approach and while testing for common method biases. Findings: The authors find evidence that the creation of a separate service organization, organized as a profit center, has a significant positive mediating effect between managerial commitment and the services' financial performance. Although separation also has a positive mediating effect between commitment and non-financial performance, organizing services as a profit center had a negative effect on the service's non-financial indicators...

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