Non-linear relationship between industrial service offering and sales growth: The moderating role of network capabilities

In an effort to approach the mixed findings regarding the relationship between a firm's industrial service offering and its performance, this study analyzes the impact of the industrial service offering on sales growth and the moderating role of network capabilities. The proposed research model is tested based on data from 91 Finnish manufacturing firms. Our results demonstrate a non-linear effect of the service offering on sales growth. We also find that network capabilities enhance the effect of the service offering on sales growth. For managers of manufacturing firms, the results imply that the active development of a comprehensive service offering should be implemented in conjunction with the development of organizational capabilities, such as network capabilities, to create value and promote improved performance.     

What service transition? Rethinking established assumptions about manufacturers' service-led growth strategies

Both academics and practitioners emphasize the importance for product firms of implementing service-led growth strategies. The service transition concept is well established, namely a unidirectional repositioning along a product-service continuum—from basic, product-oriented services towards more customized, process-oriented ones—ultimately leading to the provision of solutions. We challenge this service transition assumption and develop alternative ones regarding how product firms should pursue service-led growth. Using ‘problematization methodology’, and drawing on findings from thirteen system suppliers, we identify three service-led growth trajectories: (1) becoming an availability provider, which is the focus of most transition literature; (2) becoming a performance provider, which resembles project-based sales and implies an even greater differentiation of what customers are offered; and, (3) becoming an ‘industrializer’, which is about standardizing previously customized solutions to promote repeatability and scalability. Based on our critical inquiry, we develop two alternative assumptions: (a) firms need to constantly balance business expansion and standardization activities; and (b) manage the co-existence of different system supplier roles. Finally, we consider the implications for implementing service-led growth strategies of the alternative assumptions.     

Export and domestic sales: their interrelationship and determinants

We examine the interrelationship between export and domestic sales. Our expectation is that they are simultaneously determined, and as such should not be examined in isolation. We also investigate how firm factors—such as R & D and advertising investments—and external factors—such as market growth and exchange rate changes—impact export and domestic sales. Using a non‐recursive system of equations, we test our arguments on a representative sample of Spanish manufacturing firms between 1990 and 1997. We find significant interrelationships between export and domestic sales with striking differences between Spanish‐owned firms and foreign‐owned firms operating in Spain. For Spanish‐owned firms, domestic and export sales are complements. These firms appear to focus on the domestic market and strength in the domestic market drives their export sales. In contrast, domestic and export sales are substitutes for foreign‐owned firms. These firms' export strategies appear subsumed under strategies of managing a multinational network in which the focus is sales outside of Spain. We discuss the importance of these findings for understanding and managing export strategies. Copyright © 2005 John Wiley & Sons, Ltd.     

The free cash flow hypothesis for sales growth and firm performance

business is business! And business must grow –Dr. Seuss, The Lorax The paper investigates the agency argument that sales growth in firms with free cash flow (and without strong governance) is less profitable than sales growth for firms without free cash flow. It also tests whether strong governance conditions improve the performance of firms with free cash flow and/or limit the investments in unprofitable sales growth. Consistent with agency theory, firms with free cash flow gain less from sales growth than firms without free cash flow. But different governance conditions affect sales growth and performance in different ways. Having substantial management stock ownership mitigates the influence of free cash flow on performance, despite allowing higher sales growth. In contrast, outside blocks held by mutual funds reduce sales growth substantially, but does not increase performance from sales growth. Copyright © 2000 John Wiley & Sons, Ltd.     

Outsourcing the sales process: Hiring a mercenary sales force

In today's highly competitive environment, many firms make the decision to outsource a business process on the well-established idea that it is better to contract for services that are not within the scope of a company's core set of competencies. While outsourcing was once limited to peripheral firm activities such as advertising, firms are expanding the types of functions they outsource. For instance, many firms have begun to outsource their sales force, or at a minimum, have begun to consider ‘renting’ a sales force rather than ‘owning’ their own sales force. Being a recent trend, very little is known about what prompts firms to outsource their sales forces, nor the consequences of doing so. As such, this research explores the factors associated with determining whether a firm should outsource their sales force as well as the value to be had by engaging in such a decision. Most importantly, we offer that beyond the standard cost-based analysis, there are numerous issues that deserve consideration and examination before a firm elects to outsource its sales force.     

Solution business models: Transformation along four continua

Using a business model perspective, we identify four continua that are of specific relevance for industrial firms transforming toward solution business models: customer embeddedness, offering integratedness, operational adaptiveness, and organizational networkedness. Using these continua, we explore the opportunities and challenges related to solution business model development in two different business logics that are of particular importance in an industrial context: ‘installed-base’ (IB) and ‘input-to-process’ (I2P). The paper draws on eight independent research projects, spanning an eleven-year period, involving a total of 52 multinational enterprises. The findings show that the nature and importance of the continua differ between the I2P and IB business logics. IB firms can almost naturally transition toward solutions, usually through increasing customer embeddedness and offering integratedness, and then by addressing issues around the other continua. For I2P firms, the changes needed are less transitional. Rather, they have to completely change their mental models and address the development needs on all continua simultaneously.     

Exploring export sales management practices in small- and medium-sized firms

We investigate key sales management aspects in relation to the export involvement stage of the firm. Specifically, an attempt is made to examine the presence of significant differences in export sales management control strategy, export sales organization design and export sales management behavioral attributes between ‘active’ and ‘committed’ exporting firms. We identify several differences among these exporter groups with the main conclusion being that the sales management function is more effectively organized and managed at advanced levels of export involvement. These findings are discussed in the light of existing knowledge, and various conclusions and research implications are also derived.     

The Impact of Industrial Design Effectiveness on Corporate Financial Performance*

Despite the growing recognition of industrial design's value in creating sustainable competitive advantage, few studies have attempted to quantify the contribution that design makes to company financial performance. This article examines the relationship between industrial design and company financial performance in order to assess industrial design's contribution to this performance. Effective industrial design was evaluated by asking a panel of 138 industrial design experts to rank the industrial design effectiveness of publicly traded firms within nine selected manufacturing industries; the ranking process yielded 93 firms. Based on the rankings, firms within each industry were divided into two groups: those judged as exhibiting high design effectiveness versus those judged as low in design effectiveness. Audited financial data reported to the SEC across a seven‐year period from 1995 to 2001 were used to evaluate financial performance. Using traditional financial ratios senior managers consider essential performance measures, those firms with high design effectiveness were hypothesized to have higher returns on sales, returns on assets, and growth rates of sales, net income, and cash flow than firms with low design effectiveness. High design effectiveness firms further were hypothesized to have higher stock market returns. These comprehensive, corporate financial measures incorporate expenditures made on industrial design (industrial designers' salaries, design consultants' fees, computer‐aided industrial design equipment) and expenditures that designers influence through their design choices (material costs, manufacturing equipment). This analysis reveals that firms rated as having “good” design were stronger on all measures except growth rate measures. These results provide strong evidence that good industrial design is related to corporate financial performance and stock market performance even after considering expenditures on industrial design. Further, the patterns of financial performance over the seven‐year horizon suggest that these effects are persistent.     

Internet of things technologies,digital servitization and business model innovation in BtoB manufacturing firms

Technologies like the Internet of Things (IoT) are offering new opportunities and posing serious challenges to firms, forcing them to create entirely new business models, migrating from the conventional product-centric approaches to (digitally-based) service-oriented ones. This paper – following a qualitative research method – aims at describing the service-oriented impact of IoT technologies on firms' business models, with a particular focus on opportunities and challenges for BtoB manufacturing firms.Being the impact of IoT technologies on businesses a quite recent research stream, to date scarce attention has been devoted to the topic with specific attention to its impact on service-oriented business models in manufacturing firms. The paper contributes in this research stream in different ways. It proposes a map of digital servitization that helps in understanding firms' strategic transitions caused by technologies, making both theoretical and managerial contributions. Firstly, the research underlines the impact of the firms' sales model as a strategic factor in shaping firms' digital servitization strategies. In addition, three progressive levels of digital servitization complexity are identified, namely product- process- and outcome-oriented, that are based on an increasing use of IOT technologies and have specific challenges and opportunities.     

Steering the Sales Force for New Product Selling: Why Is it Different,and How Can Firms Motivate Different Sales Reps?

This study investigates how to direct and assemble the sales force for new product selling. In a first step, the authors draw on self‐determination theory to explore and empirically test a threefold conceptualization of motivation. Results provide insights into why sales force steering works differently in the new product selling context. Specifically, results show that for new products’ financial performance, internalized new product selling motivation is more important than intrinsic and controlled motivation. In a second step, the authors show how firms can motivate different sales reps to achieve higher financial performance of new products. In doing so, they examine the interaction effects of sales reps’ predispositions and widespread firm‐steering instruments on new products’ financial performance. Results reveal that the new product sales orientation of the bonus strengthens the positive relationship between sales reps’ performance predisposition and new product financial performance but weakens the relationship between sales reps’ learning predisposition and financial new product performance. Moreover, results reveal that the new product sales orientation of the periodic review strengthens the positive relationship between sales reps’ learning predisposition and financial new product performance. A post hoc analysis shows that a differentiated steering approach that matches appropriate steering instruments with sales reps’ varying predispositions substantially enhances reps’ financial new product performance.     

CO2 reduction through digital transformation in long-haul transportation: Institutional entrepreneurship to unlock product-service system innovation

Industrial firms seek to develop offerings that can reduce their negative ecological impact while still being economically viable. Initial studies of these offerings focused on the what and the why. Only recently have studies addressed how to pursue these efforts. The literature generally ignores the underlying mechanisms of how such offerings are created and operated. This paper reports a longitudinal case study of an industrial firm's innovative offering. This offering combines heavy duty vehicles and related services for long-haul transportation. It enables road transportation firms to reduce fuel consumption by one quarter and thereby cut CO₂ emissions and fuel costs. A multi-theoretical investigation of that offering contributes to the literature by providing: (i) a rich characterization of an industrial organization's offering that combines economic viability with a much lower negative environmental impact; (ii) a chain of underlying mechanisms that enable such an offering to emerge, including activation of institutional entrepreneurship for industrial entrepreneurship; and (iii) an articulation of the value of using multi-theoretical inquiries of ecological industrial offerings instead of seeking a new isolated theory.     

Value champions in business markets: Four role configurations

Customer value management has become a key priority in business markets, but many firms struggle to implement it. While the prior literature has considered this primarily as sales responsibility, emerging research suggests that best practice firms employ dedicated value champions to implement customer value management. However, at present, we know little about the characteristics, and the tradeoffs between different value championing approaches in business markets. Based on a discovery-oriented field research and interviews with 59 managers in 11 firms, this study illustrates four alternative role configurations firms use to employ value champions, and unpacks the characteristics and implications of each approach. Collectively, this study advances industrial marketing theory by shedding light on an emergent and contemporary management practice, and offering practical insights into how firms can employ value champions in business markets.     

Product Growth Strategies in Young High-Technology Firms

This article presents an analysis of the strategies, business practices and growth patterns of 68 small, young, high-technology firms. These firms manufactured high-technology goods or produced advanced computer software products, had at most 100 employees and reported under $30 million in annual sales. In reporting the results of her study, Teresa Pavia writes that neither a technological growth path (new products to existing customers) nor a market-expansion growth path (existing products to new customers) is superior. Practices that minimize strategic dependencies and produce a high-quality product that suits the customer's needs directly (needing no further modifications after the sale) are associated with success. Firms that have used market expansion to grow demonstrate higher levels of systematic planning and describe their industry as rapidly changing. Furthermore, they describe themselves as technologically innovative and their customers as well informed about the products they buy.     

Growing pains: Pre‐entry experience and the challenge of transition to incumbency

We examine how entrepreneurial entry by diversifying and de novo firms in new industries leads to different levels of performance. We propose that these types of firms differ in dynamic capabilities, which help them overcome growth impediments and transition to incumbency in the industry. Growth impediments arise at larger size, older tenure levels in industry, and after technological discontinuities. Because of their prior experience, diversifying firms are better equipped to handle the challenges of impediments to growth. Meanwhile, de novo firms, ostensibly tailor‐made for the targeted industry, are more likely to stumble over these growth challenges, and eventually lag behind diversifying firms. We find support for our hypotheses using a near census of firms in the U.S. wireless telecommunications industry over the 1983–2004 period. Copyright © 2011 John Wiley & Sons, Ltd.     

The impact of innovation intensity,scope, and spillovers on sales growth in Chinese firms

We investigate the relationship between innovation and sales growth of firms in China. Innovation theories suggest firms create the technological knowledge needed to have market impact with their products and drive sales growth in different ways. These include: (1) through firms’ overall innovation intensity, (2) through decisions on innovation scope (depth vs. diversity), and (3) through knowledge spillovers from technological neighbors. Little research exists on how effective these approaches are for emerging market firms in pursuit of growth. To address this, we integrate and test the effects of these different knowledge creation mechanisms using data from Chinese firms over a five-year period. Findings show that innovation intensity and knowledge spillovers positively impact sales growth. We also develop and test a model capturing the non-linear impact of innovation scope. As predicted, we find a U-shaped relationship for depth of innovation and an inverted U-shaped relationship for diversity of innovation.     

Success and Failure in New Industrial Services

The critical role of innovation has long been recognized in physical goods; however, the development of innovative services has received much less attention. The research described here reports on an early major study of success and failure in new industrial services. Building on her integration of two literatures on new product innovation and services marketing, Ulrike de Brentani reports how companies measure new service performance and the factors which are associated with success. She reports that new industrial services share some important success factors with physical goods, such as the firm's market orientation, a formal service development process, project synergy and a truly superior new service offering. Yet she finds that firms must adjust their approach to the distinctive character of services, including customer perceptions of service quality, features that successfully differentiate services in competitive terms and cost reduction.     

On the endogeneity of Cournot, Bertrand, and Stackelberg competition in oligopolies

In many industries, firms pre-order input and forward sell output prior to the actual production period. It is known that forward buying input induces a “Cournot-Stackelberg endogeneity” (both Cournot and Stackelberg outcomes may result in equilibrium) and forward selling output induces a convergence to the Bertrand solution. I analyze the generalized model where firms pre-order input and forward sell output. First, I consider oligopolists producing homogenous goods, generalize the Cournot-Stackelberg endogeneity to oligopoly, and show that it additionally includes Bertrand in the generalized model. This shows that the “mode of competition” between firms may be entirely endogenous. Second, I consider duopolies producing heterogenous goods. The set of equilibrium outcomes is characterized and shown not to contain the Bertrand solution anymore. Yet, forward sales increase welfare also in this case, notably even when goods are complements.     

On Stability in Competition: Tying and Horizontal Product Differentiation

We combine Hotelling’s model of product differentiation with tie-in sales. A monopolist in one market competes with another firm in a second market. In equilibrium firms choose zero product differentiation. Due to the tying structure no firm can gain the whole market by a small price reduction. A differentiation effect due to tie-in sales leads to this equilibrium stability.      

A permaculture primer: Using eco-theory to promote knowledge acquisition,dissemination and use in the sales organization

Responding to evidence in Dixon and Adamson's (2011) “Challenger Sale” that the sales management system employed by most of today's sales organizations failed to detect and respond to significant changes in the sales environment years ago, this research examines the concept of sales system sustainability. Borrowing from the field of eco-science where the concept of sustainability has been largely developed, this theoretical research introduces Holmgren's (2002) permaculture principles to the sales literature and offers a conceptual application of these principles in the context of industrial selling. It posits that application of these principles will aid the sales organization's acquisition, dissemination and application of knowledge, effectively positioning the organization for greater endurance and sustainability going forward. In addition to offering managerial implications throughout, this paper concludes by providing a road map for future research inquiry.     

The impact of entrepreneurial orientation on B2B branding and business growth in emerging markets

This study examines the relation between entrepreneurial orientation and brand orientation in industrial small and medium-sized enterprises (SMEs) and the extent to which the two contribute to business growth in emerging markets. The authors develop and empirically test a structural model using data collected from Hungary, a country that has undergone a political and economic transition during the past two decades since the fall of the iron curtain. The results show that entrepreneurial orientation has a positive effect on business growth in emerging markets, whereas brand orientation has an adverse effect. Furthermore, the study examines whether there are differences (1) between B2B firms and B2C firms operating in emerging markets and (2) between B2B firms operating in emerging markets (Hungary) and in developed markets (Finland). The results from comparative analyses suggest that while B2B firms and B2C firms do not differ significantly from each other, there are notable differences between emerging markets and developed markets. Specifically, the study finds that although brand orientation does not contribute to business growth in Hungarian B2B firms, it has a positive effect on growth in B2B firms operating in Finland.