Why do manufacturing firms produce services? Evidence for the servitization paradox in Belgium
Catherine Fuss (),
Pierre Blanchard () and
Claude Mathieu ()
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Pierre Blanchard: UPEC
No 330, Working Paper Research from National Bank of Belgium
The increasing role of services in GDP results from the growing share of service industries, but also from the fact that firms produce services along with goods. This paper investigates the determinants of service provision by manufacturing firms. First, it develops a model of differentiated products with, on the demand side, complementarities between the firm’s goods and services, and, on the supply side, rivalry in the allocation of expertise between the production of goods and the provision of services. Second, it provides an econometric assessment of the determinants of servitization for manufacturing firms, using a fractional Probit model with heterogeneity, controlling for endogeneity with respect to unobserved firm characteristics. Both the theoretical model and empirical estimates point to a non-linear relationship between servitization and firm productivity. The relationship is further shaped by the sector environment as well as intrinsic characteristics of the goods and services supplied.
Keywords: Services; multi-product firms; firm behavior; Total Factor Productivity; panel data analysis; non linear model. (search for similar items in EconPapers)
JEL-codes: D24 D29 L11 L22 L23 L25 (search for similar items in EconPapers)
Pages: 39 pages
New Economics Papers: this item is included in nep-bec, nep-com, nep-eff, nep-sbm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:nbb:reswpp:201711-330
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