Enhancing resource allocation efficiency: The impact of servitization in China's manufacturing sector

Abstract

The emerging digital technologies have brought about new changes to the servitization of manufacturing enterprises and resource allocation efficiency. Besides that, in the Chinese manufacturing industry, the ratio of listed companies between state-owned and non-state-owned enterprises is approximately 4:1, which also influences the resource allocation efficiency. This study establishes a comprehensive set of indicators encompassing workforce composition, financial investments, servitization propensity, and performance outcomes to gauge the holistic level of servitization among publicly traded manufacturing companies. The objective is to investigate the impact of servitization on the efficiency of resource allocation among firms within the industry. During the initial phases of servitization, the introduction of services renders products less substitutable. Consequently, some firms experience an increase in pricing levels, while others witness a reduction. This divergence in pricing strategies results in decreased resource allocation efficiency among firms. As the servitization process progresses, companies with initially high pricing levels reach a saturation point in their servitization journey, while those with lower pricing levels intensify their servitization efforts. This shift leads to an enhancement in product substitution elasticity among firms, thereby fostering an improvement in resource allocation. Notably, firms with higher levels of servitization tend to incorporate digital technologies into their service processes. They leverage information collection and data matching to formulate personalized and differentiated service strategies, consequently elevating the distinctiveness of their products. However, this transformation may also precipitate a reduction in resource allocation efficiency within the industry. It is imperative to underscore that the impact of manufacturing servitization on resource allocation efficiency varies across different regions in China, different sectors characterized by varying factor intensities, and different ownership structures. This impact is particularly conspicuous among non-state-owned enterprises, which indirectly underscores the relatively subdued competitive intensity among state-owned enterprises and the inadequacies in market-driven dynamics.