The risks of providing services

Abstract

Purpose - The purpose of this paper is to examine the risks for manufacturing companies of extending their traditional goods offerings by the addition of different kinds of services. Design/methodology/approach - The study develops a conceptual framework of nine propositions (and corresponding diagrammatic representations) of the relationships between: three kinds of risk (operational, strategic, and financial); and three strategies for the provision of added service (customisation, bundling, and broadening the range of offerings). This conceptual framework is examined empirically by qualitative analysis of data gathered in a three-year longitudinal study of managerial representatives from nine multinational manufacturing firms engaged in the addition of services to their traditional goods offerings. Findings - It was found that eight of the nine propositions are fully supported, and one receives equivocal support. In addition, several contextual factors are identified as moderating influences on the relationships between the three categories of service offering and the three classes of risk. Research limitations/implications - The study provides an original conceptual framework and nine research propositions that represent a useful starting point for the development of a formal theory of the risks of providing services. Practical implications - The conceptual framework provides guidance for managers' assessments of the risks accompanying the infusion of added services to the traditional goods offerings of manufacturing companies. Originality/value - The paper provides a novel conceptualisation of service innovation and attendant risk.

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