The Effects of B2B Service Innovations on Firm Value and Firm Risk: How Do They Differ from Those of B2C Service Innovations?

Abstract

Both developed and developing economies worldwide are becoming increasingly services-driven. By some estimates, the value of business-to-business (B2B) commerce dwarfs that of business-to-consumer (B2C). In particular, firms competing in business markets are constantly seeking to introduce service innovations to improve firm value. Yet, there is a paucity of research on B2B service innovations (B2B-SIs) and not much is known about their effects on firm value or firm risk. Furthermore, it is important to better understand how these effects differ from those of business-to-consumer service innovations (B2C-SIs). We empirically address these issues by developing a modeling system that relates B2B and B2C service innovations to firm value and firm risk, while controlling for both firm- and market-specific factors. We estimate our model using a unique panel data of 1668 service innovations across 14 industries over five years assembled from multiple data sources. The results show that B2B-SIs have a positive effect on firm value and an insignificant influence on firm risk. In contrast, B2C-SIs are associated with higher firm risk. B2B-SIs (B2C-SIs) have a higher effect on firm value in B2B (B2C)-dominant industries. In industries with a mix of business customers and consumers, B2B-SIs have slightly higher impact on firm value than B2C-SIs. Our findings offer executives important insights about the relative value of B2B service innovations.