Service Embeddedness: A Determinant Of Product Composition And Firm Internationalisation: Some Evidence From The UK (original) (raw)
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The role of service embeddedness in the internationalisation process of manufacturing firms
Over the last decade the growth of service firms, and their internationalisation, has attracted considerable attention from researchers, with a special focus on characteristics that distinguish services from goods. However, as the composition of a firm's product can contain both good and service elements, this paper argues that it is somewhat misleading to categorise a product simply as either a 'good' or a 'service'. Manufactured goods often contain client-related services embedded in them. Further, the nature of these embedded services may vary with respect to their degree of separability of production and consumption. Based on several case studies of Australian manufacturing subsidiaries in the UK, this paper examines the impact of inseparable embedded services on a firm's entry-mode choice. It reveals that the extent and nature of embedded services have a considerable impact on a firm's choice of foreign entry mode. The research findings are likely to contribute to the existing marketing and internationalisation literature.
Purpose – Perceived differences in the composition of goods and services forms the basis of a significant degree of analysis of the firm internationalisation process. In particular, product inseparability is highlighted as a distinguishing feature of service offerings and purports to explain the different approaches to internationalisation strategy adopted by service firms. The research, however, proposes that the division of goods and services into distinct products is outmoded. Rather, it is important to understand the extent of service components that embody, or are embedded in, a product offering. The authors argue that this “service embeddedness” influences the process by which a firm internationalises. The paper aims to discuss these issues. Design/methodology/approach – Based on ten case studies of Australian international firms, this paper examines the impact of service embeddedness on a firm’s internationalisation process. Findings – The research underlines that firms approach internationalisation with a view of ensuring that the various activities that combine to form their product offering are available to their international clients. Research limitations/implications – From an academic perspective, a dichotomous approach to products (good or service) underestimates the role that embedded services have on a firm’s internationalisation process. The research, therefore, has implications for researchers and practitioners as it highlights the importance of delivering products internationally that comprise of both good and embedded service components. Originality/value – The research develops a deeper understanding of the extent and nature of separability within individual product categories from international production and operations perspectives.
Internationalisation theory has largely been concerned with analysing firm internationalisation strategy and entry mode choice from a manufacturing firm's perspective. Nonetheless, as the composition of a firm's product usually contains both tangible and service characteristics, it is important to understand the extent of service components that embody, or are embedded in, a product. This paper introduces the concept of service embeddedness, which is defined as the service characteristics existing in all products and are usually incorporated to add value to a product offering. From this perspective, the paper continues to outline a value chain that shows how value is created through a series of activities similar, but somewhat distinguishable, from the value chain generally applied to manufactured goods. A conceptual model is introduced to determine the likely impact that service embeddedness may have on a firm's value-creating activities and its choice of foreign market entry mode.
Internationalisation and Integration: A Comparison of Manufacturing and Service Firms
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The intensification of markets globalisation and the diffusion of internationalisation strategies across various businesses, led the academic literature to challenge the notion of entry modes in international ventures. Nevertheless, with specific regard to soft-service industries, only a few authors investigated the entry-mode behaviour of firms for testing the applicability of traditional theories.
This paper investigates the aspect of market commitment by international service firms into the new host market. Australia was chosen as the host market because it is a strong service economy. This paper responds to several calls for studies focusing on service firm internationalization and the often neglected market commitment aspect. After splitting service firms into capital intensive and knowledge intensive categories, it is argued that they exhibit different patterns of initial resource commitment. Adopting a case study approach, the results indicate that capital intensive service firms enter a new host market with relatively lower resource commitment than knowledge intensive service firms and hence follow the Uppsala process model more closely.
Determinants of entry modes for international service organisations : evidence from China
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This paper examines the influences on entry modes for Australian service organisations internationalising to China. A conceptual model was developed utilising past research in the field and internationalisation theory. The model incorporated the constructs of: resource commitments, previous international experience and whether or not the service could be offered independently of any physical product. The model was empirically tested using qualitative data from interviews conducted with senior representatives from 23 Australian service organisations with operations in China. The data indicated that these organisations increased the resource commitments to their Chinese operations, the longer they were in operation and the more familiar the organisation became with the Chinese environment. The data also suggested that, whilst international experience was desirable prior to entering China, it was not mandatory for success. A bias was identified amongst the respondents towards exporting those services which were separable from products to China and foreign direct investment, representative branches and significant local investment for services that were not separable from products.