Guest article by Thomas Dotzel and Venkatesh Shankar, winners of the SERVSIG Best Service Article Award.
We would like to start by thanking the members of the awards committee and SERVSIG for selecting our article for the 2019 Best Service Article Award. We are deeply honored. Spending many hours on selection and organizing an elaborate virtual awards ceremony – all during a global pandemic – is the epitome of excellent service. Thank you for that! The COVID pandemic has caused significant hardship and frustration in all our lives. But it has also allowed us to have the wonderful experience of watching award ceremonies on the SERVSIG YouTube channel, while sitting around the breakfast table and sharing the news instantly with our families. We thank Werner Kunz for inviting us to write about our article and our current exciting new research project.
Most scholars would agree that the vast majority of innovation research focuses on goods innovation in a business-to-consumer (B2C) context. To us, this focus seemed somewhat odd, considering that business-to-business (B2B) markets occupy the lion’s share of all markets and that developed countries are all service-driven economies. After studying predominantly B2C service innovations in our previous projects, we decided to tackle this issue head on to determine just how impactful B2B service innovations are for firm value and risk and how these effects differ from those of B2C service innovations.
B2B service innovation is an important yet under-researched area, which made it easier for us to identify powerful research questions. But answering these questions and rigorously developing and testing key hypotheses proved to be a significant challenge. There are no readily available databases that provide longitudinal data on service innovations across different industries. But we were undeterred. We rolled up our sleeves, and thanks to the help of more than a dozen research assistants, began the process of painstakingly collecting the required innovation data by digging through approximately 200,000 press releases and news sources. We used both manual coding and natural language processing techniques to analyze the innovation announcements. We completed our dataset by merging the innovation data with other firm and industry-level data that we downloaded from databases such as Computstat, CRSP, and SDC Platinum. In the end, compiling our dataset took thousands of human-hours. Having gone through this tedious process, we now completely understand why empirical research on service innovation is significantly underrepresented in the innovation literature, despite its managerial and theoretical relevance. It is slow and enormously time-consuming, but we would like to emphasize that we consider the outcome to be easily worth the effort. We hope our work inspires the service research community to not shy away from challenging data collection if it helps answer important research questions.
Our main findings underscore the attractiveness of B2B service innovations. They have a positive effect on firm value and do not exacerbate either systematic risk or idiosyncratic risk. This positive impact is even enhanced for firms that also introduce more goods innovations. Importantly, B2B service innovations have a greater positive effect on firm value than B2C service innovations. However, surprisingly, unlike B2C service innovations, the effect of B2B service innovations on firm value is marginally less favorable when the innovation announcement emphasizes customers.
Moving forward, we will continue to study service innovations one data point at a time, just as we have done in the past. We are excited to have completed another archival data collection on a new project that explores innovations in the technology sector. Technology firms are among the most valued firms and are worth trillions of dollars. They are a hotbed for service, goods, and software innovations. Given the current antitrust discussions in the United States involving technology firms, we are all the more eager to develop a better understanding of how the different types of innovations contribute to these firms’ extraordinary valuation.
In closing, research in service innovation has been growing steadily over the last decade. However, according to many leading executives, it is not growing fast enough. Many important questions still remain unanswered, offering tremendous scope for future research. We hope this article will spur more scholars to dive further into this area, vindicating our view that the contribution gain is worth the data-collection pain.
College of Business
University of Nebraska-Lincoln
Mays Business School
Texas A&M University
Source of the SERVSIG Best Paper Award:
Dotzel, T. & Shankar, V. (2019). The Relative Effects of Business-to-Business (vs. Business-to-Consumer) Service Innovations on Firm Value and Firm Risk: An Empirical Analysis. Journal of Marketing, 83(5), 133–152. doi: 10.1177/0022242919847221.