Why Do Manufacturing Firms Sell Services? Evidence from India
Manufacturers in India are increasingly selling services—a phenomenon referred to as servitization. Both the proportion of manufacturers selling services and the share of services in total revenue of manufacturers increased threefold between 1994 a...
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World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/en/687351624023153525/Why-Do-Manufacturing-Firms-Sell-Services-Evidence-from-India http://hdl.handle.net/10986/35821 |
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okr-10986-358212021-06-25T05:10:37Z Why Do Manufacturing Firms Sell Services? Evidence from India Grover, Arti Mattoo, Aaditya SERVICES TRADE INNOVATION STRUCTURAL TRANSFORMATION SERVITIZATION MANUFACTURING FIRMS IMPORT COMPETITION DEINDUSTRIALIZATION Manufacturers in India are increasingly selling services—a phenomenon referred to as servitization. Both the proportion of manufacturers selling services and the share of services in total revenue of manufacturers increased threefold between 1994 and 2013. More productive manufacturers and those more exposed to import competition are more likely to sell services and to obtain a higher share of their revenue from services. A 10 percent increase in servitization is associated with 2.6 percent increase in manufacturing revenue. However, servitizing firms suffer a greater contraction in manufacturing revenue with increased import competition. This evidence suggests that servitization is not a successful defensive strategy to maintain manufacturing sales in the face of import competition, and it is more likely to be an exit strategy to flee import competition. Corroborative results indicate that past services sales are positively associated with the introduction of new services products and eventually a switch out of manufacturing and into services as the primary activity. Thus, servitization appears to be an aspect of “premature deindustrialization” in India, driven by the inability of manufacturers to cope with import competition, rather than structural transformation associated with a maturing manufacturing sector. 2021-06-24T13:46:42Z 2021-06-24T13:46:42Z 2021-06 Working Paper http://documents.worldbank.org/curated/en/687351624023153525/Why-Do-Manufacturing-Firms-Sell-Services-Evidence-from-India http://hdl.handle.net/10986/35821 English Policy Research Working Paper;No. 9701 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper South Asia India |
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Digital Repository |
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Foreign Institution |
| institution |
Digital Repositories |
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World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
SERVICES TRADE INNOVATION STRUCTURAL TRANSFORMATION SERVITIZATION MANUFACTURING FIRMS IMPORT COMPETITION DEINDUSTRIALIZATION |
| spellingShingle |
SERVICES TRADE INNOVATION STRUCTURAL TRANSFORMATION SERVITIZATION MANUFACTURING FIRMS IMPORT COMPETITION DEINDUSTRIALIZATION Grover, Arti Mattoo, Aaditya Why Do Manufacturing Firms Sell Services? Evidence from India |
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South Asia India |
| relation |
Policy Research Working Paper;No. 9701 |
| description |
Manufacturers in India are increasingly
selling services—a phenomenon referred to as servitization.
Both the proportion of manufacturers selling services and
the share of services in total revenue of manufacturers
increased threefold between 1994 and 2013. More productive
manufacturers and those more exposed to import competition
are more likely to sell services and to obtain a higher
share of their revenue from services. A 10 percent increase
in servitization is associated with 2.6 percent increase in
manufacturing revenue. However, servitizing firms suffer a
greater contraction in manufacturing revenue with increased
import competition. This evidence suggests that
servitization is not a successful defensive strategy to
maintain manufacturing sales in the face of import
competition, and it is more likely to be an exit strategy to
flee import competition. Corroborative results indicate that
past services sales are positively associated with the
introduction of new services products and eventually a
switch out of manufacturing and into services as the primary
activity. Thus, servitization appears to be an aspect of
“premature deindustrialization” in India, driven by the
inability of manufacturers to cope with import competition,
rather than structural transformation associated with a
maturing manufacturing sector. |
| format |
Working Paper |
| author |
Grover, Arti Mattoo, Aaditya |
| author_facet |
Grover, Arti Mattoo, Aaditya |
| author_sort |
Grover, Arti |
| title |
Why Do Manufacturing Firms Sell Services? Evidence from India |
| title_short |
Why Do Manufacturing Firms Sell Services? Evidence from India |
| title_full |
Why Do Manufacturing Firms Sell Services? Evidence from India |
| title_fullStr |
Why Do Manufacturing Firms Sell Services? Evidence from India |
| title_full_unstemmed |
Why Do Manufacturing Firms Sell Services? Evidence from India |
| title_sort |
why do manufacturing firms sell services? evidence from india |
| publisher |
World Bank, Washington, DC |
| publishDate |
2021 |
| url |
http://documents.worldbank.org/curated/en/687351624023153525/Why-Do-Manufacturing-Firms-Sell-Services-Evidence-from-India http://hdl.handle.net/10986/35821 |
| _version_ |
1764483845882642432 |