Servitization and financial performance: examining the moderating roles of financial and operational slack

Purpose This study examines the impact of service scale and service scope on the financial performance of manufacturing firms, while considering the moderating roles of financial and operational slack. Design/methodology/approach The research tests the hypotheses using panel data from 673 manufacturing firms listed on the Bombay Stock Exchange from 2019 to 2023. Findings The results reveal that both service scale and scope significantly improve financial performance. However, financial slack negatively moderates the relationship between service scale, scope and performance. Alternatively, operational slack increases the positive effects of service scale and scope on financial outcomes. Research limitations/implications This study focuses on financial and operational slack, excluding strategic and human resource slack, which may also influence financial performance. Practical implications The research offers valuable insights for managers, demonstrating that both the dimensions of servitization can improve financial performance. Specifically, firms with lower operational slack see increased returns from service scale, while those with higher operational slack benefit more from service scope. Originality/value This study enriches the servitization literature by highlighting the financial benefit of both service scale and scope. It is the first study to empirically verify the moderating effects of financial and operational slack on the relationship between dual servitization dimensions and financial performance.