Abstract:

It has become an important strategy for manufacturers to supply service-related values and build service-based advantage. This study identifies the key drivers of service advantage and explores their interplay. To reconcile the controversy between absorptive capacity view and “Not Invented Here” syndrome, this study examines the contingent interaction of social ties and innovation capability by introducing market environments as the contextual factors. Using a dataset of manufacturing enterprises survey, this study concludes the following findings. First, innovation capability is more effective to build service advantages than external ties. Second, market competition significantly strengthens the interactions effect of innovation capability and social tie. The similar results can be found with market dynamism as the contingent factor. Thus, it is very necessary for manufacturers to develop both innovation capability and social ties in an unfavorable market.

Key words: service advantage, innovation capability, business tie, institutional tie, market environment