Matthieu Crozet and Emmanuel Milet’s new publication in the Journal of Economics and Management Strategy questions the artificial divide between manufacturing and services activities. The empirical study, which exploits exhaustive data for French manufacturing firms between 1997 and 2007, provides original evidence on the extend and the consequence of servitization of the French manufacturing sector. They find that the frontier between the production of goods and services is very blurry. In 2007, more than 74% French manufacturers sell services in addition to producing goods. This production is not negligible: Services accounted for almost 20% of total sales of manufacturing firms. Servitization of manufacturing grew steadily over the 1997-2007 decade, but at a slow pace. Finally, Crozet and Milet also estimate the impact of servitization on firm performance. Controlling for various sources of endogeneity bias, the results indicate that firms that start selling services increase their profitability by 0.4%, their employment by 2.1%, and their total sales by 0.6%.
Crozet, M. and E. Millet (2017), “Should everybody be in services? The effect of servitization on manufacturing firm performance”, Journal of Economics and Management Strategy, forthcoming.