Service innovation in manufacturing firms: Evidence from Spain Lluı ´s Santamarı ´a a,n , Marı ´a Jesu ´ s Nieto b , Ian Miles c a Departamento de Economı ´a de la Empresa, Universidad Carlos III de Madrid, C/Madrid, 126-Getafe 28903, Madrid, Spain b Seccio ´n de Organizacio ´n de Empresas, Universidad Carlos III de Madrid, C/Madrid, 126-Getafe 28903, Madrid, Spain c Manchester Business School, University of Manchester, Booth Street West, Manchester, M15 6PB, United Kingdom article info Keywords: Innovation Manufacturing Service Servitisation abstract The ways in which manufacturing firms come to offer services to customers – servitisation or servicisation – are attracting considerable attention. This paper examines an innovation survey of Spanish firms in order to investigate one aspect of this phenomenon: the introduction of new or improved services by manufacturers. Specifically, the paper analyses the determinants of service innovations in manufacturers and determines whether they differ from those of product or process innovations in these same firms. The study finds that almost 20 percent of the firms in the sample have introduced such services in the recent past and that important differences exist between service and product (goods) innovations, with service innovations being particularly related to human resource development and closer links to customers. This suggests that service innovation by manufacturers has much in common with the innovation patterns detected in service sector firms. Intriguing differences across manufacturing sectors are also noted, with the lowest- and highest-tech sectors reporting more service innovations than the medium-tech sectors. & 2011 Elsevier Ltd. All rights reserved. 1. Introduction Services play a key role in developed economies. Market services have become the main driver of the economy and the major contributor to productivity growth, especially as the use of information and communication technology (ICT) services has grown. Moreover, services are the main source of job creation across the OECD area (OECD, 2005). In the European Union (EU- 27), the contribution of services to the gross value added was approximately 72 percent, while that of industry was 20.1 percent. Focusing specifically on Spain, the contribution of ser- vices to the gross value added was around 70 percent, a similar percentage to the average of the EU-27 (Eurostat, 2009). In many developed countries the distinction between the manufacturing and the service sector has faded, with the distinc- tion between goods production and service activities becoming increasingly blurred (Lay, 2002). Each sector has taken on some characteristics of the other (Miles, 1993). Indeed, in manufactur- ing industries, increasing competition is driving firms to offer services with their products. Services may be important for manufacturing firms, because service components are often integral to the delivery, consumption and use of tangible goods (Bharadwaj et al., 1993). Scholars use various terms to refer to this growth in the importance of services, servitisation (Vandermerwe and Rada, 1988; Baines et al., 2009) and servicisation (Quinn et al., 1990) being the most common, though some authors also refer to it as the rise of product-service systems (Johnstone et al., 2009; Pawar et al., 2009; Martinez et al., 2010). The idea of service-dominant logic, meanwhile, stresses the fact that some firms acquire goods in order to supply services to their customers or to allow them to self-service (Vargo and Lusch, 2004). Recognition of this logic may lead firms to rethink their product offerings so as to be able to compete in terms of the services delivered. Servitisation of manufacturing firms was first discussed by Vandermerwe and Rada (1988), who refer the process of creating value by adding services to product offerings. This process is seen as being driven by ever more complex customer demands and a need to defend against competition. In effect, manufacturing firms become service providers (Lay et al., 2009), a shift that requires them to change their strategies and develop new business concepts (Neu and Brown, 2005). A diverse range of servitisation examples can be found in the literature on car manufacturers, aerospace industry, machine tools, printing machinery and other capital equipment (Baines et al., 2009). Typical examples of the services provided include installation and training, after-sales services (including product repair and main- tenance, customer support and recycling of goods at the end of their lifetime), inspection and financial or insurance services. Interest in this topic is growing in academia, business and government (Hewitt, 2002), an interest largely based on a belief that a move towards Contents lists available at SciVerse ScienceDirect journal homepage: www.elsevier.com/locate/technovation Technovation 0166-4972/$ - see front matter & 2011 Elsevier Ltd. All rights reserved. doi:10.1016/j.technovation.2011.08.006 n Corresponding author. Tel.: þ34 91 624 8643; fax: þ34 91 624 5707. E-mail address: lsantama@emp.uc3m.es (L. Santamarı ´a). Please cite this article as: Santamarı ´a, L., et al., Service innovation in manufacturing firms: Evidence from Spain. Technovation (2011), doi:10.1016/j.technovation.2011.08.006 Technovation ] (]]]]) ]]]–]]]