DEALING WITH THE FINANCIAL IMPLICATIONS OF ADVANCED SERVICES THROUGH ALTERNATIVE FINANCIAL ENTITIES Bart Kamp & Ibon Gil de San Vicente Orkestra-Basque Institute of Competitiveness Corresponding author: bart.kamp@orkestra.deusto.es ABSTRACT Purpose: to look into the relevance of access to finance and know-how on industrial asset management to launch advanced services Design/Methodology/Approach: multiple case study, explorative and qualitative research Findings: advanced services incentivize companies to amplify their scope for funds and instruments to finance and manage servitized market propositions, and to look beyond the traditional ways and sources for funding business operations. Originality/Value: drawing attention to financial barriers related to the implementation of advanced services KEYWORDS: servitization, pay-per-use, advanced services, industrial asset management, financial entities. 1. INTRODUCTION Myriad studies have pointed out that companies with an interest in servitization are confronted with cultural and structural barriers (Baines and Lightfoot, 2013; Gaiardelli et al., 2014; Kindström and Kowalkowski, 2014; Vargo and Lusch, 2008). In the present paper, we argue that firms can also face challenges in the sphere of financial asset management and access to funding when considering the implementation of advanced services. When offering advanced services - where revenue generation is directly linked to asset use, availability, and/or performance (Baines and Lightfoot, 2014), the payment modalities are typically framed on a pay-per-use or pay-per-outcome basis. In many cases, this goes together with the launching of leasing schemes and a pre-financing of the used assets. The former implies a change to a company’s cash flows and its treasury management (Toxopeus et al., 2018) and a shift from invoicing on an OPEX (operational expenses) instead of a CAPEX (capital expenditure) basis (Gebauer et al., 2010). Similarly, pay-per-use arrangements raise the complexity and risks of business operations and cash management. Among others, because it entails assessing and dealing with the residual value of assets in use at customers, fleet management of devolved assets at end-of-contract, exposure to possible defaults of clients, and determining responsibilities of users and suppliers in case of malfunctioning and breakdown of assets. Consequently, whether a firm can propose advanced services to the market is a question of skills and resources. And whether such resources are available inside the focal firm or outside (cfr. resource basis of the firm versus external resource dependency of the firm – Barney, 1991; Hunt, 2013; Pfeffer and Salancik 1978; Drees and Heugens, 2013). Hence, the feasibility of rolling out this type of services can pose particular problems to companies that do not have deep pockets or big cash reserves and who do not possess internal funding mechanisms or company-own financial services units. An eventual lack of internal resources can off course be compensated by reaching out to external financiers for such operations. In that event, finding adequate solutions arguably depends on the relational capital of companies (Dyer et al., 1998, 2018) as well as their search capacities (Teece, 1986; Rosenkopf and Nerkar, 2001) to get support from skilled and resourceful. In this sense, developing advanced services may not be same for a firm with a broad external network of contacts in the financial scene warranting access to a panoply of contemporary funding solutions versus a company with a limited outreach to finance providers and a blurred sight on available financial solutions.