The Financial Impact of Applying the Servitization Business Model: an empirical research based on the residual income valuation model
Abstract: As many manufacturing firms find servitization business model a trend, a need for investigating the firm value difference between this new business model and the traditional manufacturing business model has arisen. In this study, we examine the implied q-value in these two business models and consequently discuss the distinct business characteristics of transforming into a service-focused business model. In detail, the residual income valuation model is applied to imply the q-value with 48 companies in each group. A higher implied q-value is found in servitized companies and indicates a shifting focus from short-term physical assets to long-term knowledge resources. Moreover, we specifically explore the role intellectual capital plays in the servitization business model and find it explains much of the difference. Overall, this study contributes to quantify the financial impact of applying the servitization business model.
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