Service business development in small and medium capital goods manufacturing companies

Purpose – This paper focuses on how small and mediumsized enterprises (SMEs) from the capital goods manufacturing sector develop the service business. Assuming the service business development depends on contingency factors, this paper explores how SMEs align external environment, strategy and organizational design. Design/methodology/approach – A multi-case study design on capital goods manufacturers from Italy, Sweden and Switzerland was employed. Findings – Service strategy formation and implementation in SMEs depend on their value chain position and the business environment. Suppliers with few customers selling directly to customers increasingly offer logistic and repair services as well as R&D-oriented services. In contrast, OEMs selling through distributors do not primarily extend the services offered, but rather reconsider service process configuration together with distributors. Altogether, we de-scribe four different service responses to specific combinations of value chain position and business environment. Research limitations/implications – Our findings are limited to the capital goods manufacturing industry. Originality/value – Whereas previous research neglects how SMEs develop the service business, this article offers key insights in the interrelationship among the value chain position and the business environment as well as the service strategy formation and implementation. We enrich the knowledge of service business development in manufacturing by explaining how the value chain position and business environment determine the way how SMEs develop the service business.