A capability perspective on service business development in small and medium-sized suppliers

SummaryExisting research suggests three theoretical pathways for service business development. The first pathway involves incremental enhancement of relational value for existing supplier–buyer relationships (Alpha). The second pathway captures financial value-seeking behavior in existing and new supplier–buyer relationships (Beta). The third pathway is a radical leap toward a new value constellation downstream in the value chain (Gamma). Our main research question aims at the exploration of these three pathways with respect to small and medium-sized suppliers. The research design is based on an exploratory study and an in-depth study. The exploratory study was able to replicate these three pathways in the empirical context of small and medium-sized suppliers. The in-depth study explores and describes co-evolvement of the dynamic and operational capabilities of each pathway. The results provide testable propositions that can be used to guide future research. The paper offers a comprehensive framework that will assist researchers in the conceptualization of paths for service business development and in the operationalization of capabilities. For managers, its value lies in a description of the capabilities needed to achieve an incremental enhancement of relational value in existing supplier–buyer relationships (Alpha), financial value-seeking behavior in existing and new supplier–buyer relationships (Beta), and radical leaps into new value constellations downstream in the value chain (Gamma).

► We bridge research on system selling and services in manufacturing companies.
► We examine three pathways for the service business development at the supplier levels.
► We show the capabilities necessary to enhance the relational value for existing supplier–buyer relationships.
► We show the capabilities necessary to seek for financial opportunities in existing and new supplier–buyer relationships.
► We describe the capabilities for a radical leap toward a new value constellation downstream in the value chain.