Effect of service transition strategies on firm value

Eric Fang, Robert W. Palmatier, Jan Benedict E.M. Steenkamp

Research output: Contribution to journalArticlepeer-review


The authors investigate the effectiveness of service transition strategies for generating shareholder value by evaluating secondary data pertaining to 477 publicly traded manufacturing firms during 1990-2005. The impact of a firm's transition to services on firm value (as measured by Tobin's q) remains relatively flat or slightly negative until the firm reaches a critical mass of service sales (20%-30%), after which point they have an increasingly positive effect. Furthermore, the effect of service sales on firm value depends on both firm and industry factors. Service transition strategies are more effective at enhancing value when the service offerings are related more to the firm's core business and when firms have more available resources (i.e., resource slack). The impact of adding services to core products on firm value amplifies as industry turbulence increases but diminishes when the firm's core products are in high-growth industries.

Original languageEnglish (US)
Pages (from-to)1-14
Number of pages14
JournalJournal of Marketing
Issue number5
StatePublished - Sep 2008


  • Firm value
  • Resource-based view
  • Service ratio
  • Service transition strategies
  • Solution selling
  • Tobin's q

ASJC Scopus subject areas

  • Business and International Management
  • Marketing


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