1 Introduction

In response to increasingly complex customer needs and intensified market competition, many manufacturing firms have started adding more services to their product packages, and even transforming themselves into service providers (Gebauer et al. 2010; Geum et al. 2011; He and Lai 2012; Neu and Brown 2005; Sawhney et al. 2004). However, despite the profit potential that service represents, there are fewer manufacturing firms with strong service strategies than there could be (Hong et al. 2010). Several prominent failures have been observed as manufacturing companies have extended their operations into the service business, such as Intel’s move to web-based services or Boeing’s attempt to offer financial services (Sawhney et al. 2004). The shift to services is not a trivial move for manufacturers, and many firms face barriers or challenges in doing so (Oliva and Kallenberg 2003; Reed and Storrud-Barnes 2009). Growing numbers of researchers have investigated the issues of service management by manufacturing firms, but several gaps still exist in this literature.

First, cases of both success and failure have motivated manufacturing firms to identify whether and under what conditions a service strategy can be effective for improving financial performance (Bolton et al. 2007; Gebauer et al. 2010). So far, it has been difficult to reach a consensus on the relationship between increased emphasis upon services and overall business performance in manufacturing industries. Although much of the existing literature supports a positive relationship between service strategies and business performance, several researchers have proposed a negative effect due to organizational conflicts and loss of strategic focus (Fang et al. 2008; Mathieu 2001). Sawhney (2006, p. 378) identified a need “to conduct an empirical investigation to see if the financial benefits of moving toward solutions (services) outweigh the risk and to define the contextual factors that separate winners from losers in migration to a solutions approach.”

Second, providing services means developing a new business model, and not all manufacturing firms are well-suited to do this. Manufacturing firms that adopt a service strategy need to change their organizational structures, cultures, and styles of leadership (Gebauer and Fleisch 2007; Mathieu 2001; Oliva and Kallenberg 2003). The transformation paths from a product-centric strategy to a combined product-service strategy are still poorly understood (Jacob and Ulaga 2008). Previous studies have identified internal and external factors that influence service provision in manufacturing. The internal factors refer to organizational configurations, such as corporate culture, commitment to service by top managers (Antioco et al. 2008; Homburg et al. 2003; Neu and Brown 2005), organizational structure, service rewards, information systems, and decision processes (Gebauer 2008; Homburg et al. 2003; Neu and Brown 2005). The external factors involve downstream and upstream supply chain integration (Ellram et al. 2004; He and Lai 2012). In general, it is quicker to change the internal factors than the external factors, and changing the internal factors may facilitate changes in the external factors. For instance, the development of a customer-oriented culture can determine the principles for dealing with customers’ needs, and these principles influence the patterns of cooperation between firms and their customers. Therefore, it is important to understand which organizational characteristics are beneficial for service provision, and how these organizational characteristics affect business performance through the service strategy.

Third, previous studies have explored service efforts by manufacturing companies through collecting data from various single countries, such as the USA, Spain, the UK, Switzerland, Germany, or China (Gebauer 2007; He and Lai 2012). However, with the continued increase in globalization, many manufacturing companies operate in a global environment, and their competitors come from different countries. Empirical evidence from the global context can enhance the transferability and generalizability of results in such researches. In addition, the usual approach to studying service-oriented organizational configurations has involved case studies (Gebauer et al. 2008, 2010). Only a few studies have taken a large-scale approach (Fang et al. 2008; He and Lai 2012). Further quantitative analysis from a broad range of firms is needed to provide insights in this field (Gebauer et al. 2008).

To address these gaps, this study examines the relationships between organizational empowerment, service strategy and business performance in global manufacturing companies. We make three principal contributions to the literature on service management by manufacturers. First, we explore the relationship between organizational empowerment and service strategy in manufacturing firms. We also identify the moderating role of technological change in the relationship between organizational empowerment and service strategy. Second, we examine the relationship between service strategy and business performance in a global context, which provides further empirical evidence on the effects of servitization in manufacturing. Finally, we provide evidence from a large-scale survey, and use both structural equation modeling (SEM) and multi-group analysis to test our hypotheses.

The remainder of this paper is structured as follows. The next section elaborates the theoretical background of service provision by manufacturers. The Sect. 3 develops our hypotheses. The method and results are presented in Sect. 4. The paper ends with a discussion of its theoretical contributions and limitations, managerial implications, and conclusions.

2 Service provision by manufacturers

Previous studies in this field have developed several ways to categorize service initiatives in the manufacturing context, as shown in Table 1.

Table 1 Service categories in the literature
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Among the many service classifications, the two most widely accepted categories for understanding industrial services are product-related and customer support services (Gebauer 2007; He and Lai 2012; Mathieu 2001). The main goal of product-related service is to keep products functioning properly, whereas customer support services enhance the efficiency and effectiveness of value creation by reconfiguring the existing customer activity chain. The dimensions of customer support services, such as the nature of the services offered, the relationship between the firm and its customers, or the level of service customization (Lovelock 1991), suggest that these services involve an intense relationship between the firm and the customer, and a high degree of customization (Mathieu 2001). By comparison, product-based services such as repairs and maintenance are often routine and can be more easily standardized. The various types of service provision may require different organizational principles, structures, and processes (Verma et al. 2002). The most common strategy for manufacturing firms is a product-based service (Cagliano et al. 2005). Therefore, this study focuses on product-based service provided by manufacturers.

3 Hypotheses development

Manufacturers who place a greater reliance on services can realize more sales and enhance product value (Fang et al. 2008). The positive effects of service provision by manufacturers can be explained from the financial, marketing, and strategic perspectives.

Offering services can provide more stable revenues than selling goods (Sawhney et al. 2004). The sale of products, especially capital goods, is often a one-off transaction, but service provision can follow a recurring pattern and generate regular income (Malleret 2006). Substantial revenue from services can be achieved throughout the life cycle of a tangible product, which tends to reduce the vulnerability of cash flow (Oliva and Kallenberg 2003). In addition, services offer higher profit margins than products. The average margin for products in many manufacturing industries has dropped in recent times to no more than 1 or 2 %. However, the margins for providing typical after-sales services such as repairs and maintenance may be more than 10 % (Cohen et al. 2006).

From the perspective of marketing, services tend to boost business performance because they can lock in customers and allow the exploration of more market opportunities (Grönroos 2011). Services help manufacturing firms to keep in continuous interaction with their customers, and to turn one-transaction relationships into long-term relationships (Malleret 2006). This type of continuous relationship can develop trust and commitment between the firm and the customer, which can increase the switching cost and decrease the willingness of customers to change partners (Wu et al. 2010). Offering services can also help manufacturers to receive feedback information about their products from customers (Kastalli and Looy 2013). The development of a product or service may require customers’ opinions, particularly in the case of customized offerings. Service offerings that comprehensively address customers’ needs can lead to customer satisfaction, which in turn can further facilitate customer loyalty. Loyal customers may create more profits than new customers, particularly in a service setting, as loyal customers have lower price sensitivity, more confidence in the supplier’s credibility, and are more willing to disclose information to the seller (Rust et al. 2004).

From a strategic perspective, offering services provides a source of differentiation strategy and development of core competence (Oliva and Kallenberg 2003). Price competition alone cannot ensure a sustained competitive advantage. Services are more difficult to replicate than tangible products, because of their characteristics of intangibility, inseparability, variability, and perishability (Vargo and Lusch 2008). As a means of differentiation strategy, combining products and services may benefit the retention of existing customers and the attraction of new customers, while developing a higher entry barrier for competitors (Mathieu 2001). Therefore, we propose the following hypothesis:

H1

There is a positive relationship between service strategy and business performance in manufacturing firms.

In sectors of manufacturing where competition is intense, products are fairly homogenous and market growth is relatively slow or even decreasing (Song et al. 2008). In this situation, the differential advantages generated by unique and difficult-to-duplicate resources become more important (Hunt and Morgan 1995). Therefore, service offerings, as differentiation strategies, are critical to a firm’s value under conditions of intense competition (Oliva and Kallenberg 2003). In industries with little competition there may be few competitors, or the industry’s total sales may increase gradually. In that case, even companies without rare or valuable resources can often generate acceptable profits. Thus, we propose the following hypothesis:

H2

Competition intensity positively moderates the relationship between service strategy and business performance.

As indicated in Sect. 2 of this study, delivering services are often more complex than producing products, and this kind of business is filled with uncertainty. Manufacturers cannot realize a service strategy easily, because there are significant differences between service and manufacturing systems (Mathieu 2001; Gebauer et al. 2010). For example, manufacturing companies typically emphasize production efficiency and economies of scale, but service-oriented values are focused on interaction and responsiveness. To make a shift toward service-oriented values requires the empowerment of employees. Such empowerment means that employees are given discretion to make job-related decisions, and are provided with sufficient access to information and resources concerning company activities (Bowen and Lawler 1992). In other words, employees gain the authority and ability to manage their own work, which enables them to develop a sense of responsibility toward the organization and the customers. Given the above considerations, we argue that organizational empowerment is positively related to service strategy by manufacturers. There are two main reasons why this is so.

First, service emphasizes flexibility, and this often involves uncertainty in outputs. To successfully reduce uncertainty and satisfy customers’ needs on time, the employees involved in service activities must make quick decisions. They must be encouraged to make choices in determining the best way to solve service problems. Increased autonomy allows individuals to have greater discretion in deciding how to perform their work (Drach-Zahavy 2004). For instance, customers often want a quick response in service delivery, especially in situations of recovery from service failure. If employees are not sufficiently empowered to make the necessary interactions with the customers and determine compensation for them, they will fail in the act of recovery (Ghosh 2013). Empowered employees can make greater efforts to remedy service failures, and even creatively break the existing rules to turn potentially frustrated customers into satisfied customers. Furthermore, empowered employees often have an excellent perception of latent customer needs, and are therefore able to recognize opportunities for developing new services and enlarging the scope of services (de Jong and Vermeulen 2003).

Second, a successful extension of the service business by manufacturing firms requires enthusiastic and long-term commitment of employees. Organizational empowerment is an important management tool for motivating service employees to deliver service proactively (Huang et al. 2010; Jiang et al. 2011). When employees feel that the management is looking after their needs, they find that their work is more meaningful and they take better care of their customers. The satisfied customers will interact with employees frequently and provide their opinions on service provision (Dudenhöffer and Dormann 2013) which will be beneficial for improving the service scope and degree to meet the demand of customers. Therefore, we propose the following hypothesis:

H3

There is a positive relationship between organizational empowerment and service strategy in manufacturing firms.

However, in some situations attempts to empower the employees bring problematic results (Jiang et al. 2011). As industrial products are often technology intensive, the factor of technological change may moderate the relationship between organizational empowerment and service strategy in a manufacturing company (He and Lai 2012). Technological change, as a dimension of environmental uncertainty, has been identified as one of the most relevant contingent factors affecting service provision (Lee and Wong 2011). In an environment characterized by a high rate of technological change, the ambiguity and unpredictability in offering product-based service delivery is also high. The employees, who have direct relations with the customers, have a rich knowledge of the customers’ needs. These employees hope to receive adequate decision-making power to make the choices that can satisfy their customers’ needs quickly and precisely. In that case, employees tend to seek improved performance in satisfying customer needs, which motivates them to insist on service provision by their manufacturing firms. Furthermore, in an empowered organization, managers can make quicker decisions because of the flatted management structure and faster information flow. Therefore, we propose the following hypotheses:

H4

Technological change positively moderates the relationship between organizational empowerment and service strategy in manufacturing firms.

Based on our four formulated hypotheses, a conceptual model is proposed as shown in Fig. 1.

Fig. 1
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The conceptual model and hypotheses

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4 Methodology

4.1 Data and sample

The data used in this study were drawn from the fifth round of the International Manufacturing Strategy Survey (IMSS), a worldwide research project that uses a standard questionnaire to gather information about practices and performance associated with manufacturing strategy in a global context. This round of the IMSS included a section inquiring into the “shifting of manufacturing toward services.” This addition is an important change in IMSS-V, which keeps pace with the development of manufacturing practices and theory. The survey for IMSS-V ended in 2011. Some 725 companies took part in the survey, representing 20 countries. The industries included in this survey were those with the International Standard Industrial Classification (ISIC) codes 28–35, which include manufacturers of products such as fabricated metal items, machinery, equipment, office and computing devices, electrical machinery, electronic products such as radios or televisions, communication equipment, and motor or transportation equipment. Questionnaires were mailed or emailed to the Director of Operations/Manufacturing or the General Manager of each company. Letters were attached to explain the aim of the survey, the structure of the questionnaire and the assurances of confidentiality. Questionnaires were returned by mail, email, or fax to the research coordinators in various countries. Finally, the data assembled by all of the research coordinators were pooled in a common database.

The final dataset used in our study included 365 samples that had usable responses for the purposes of this study. Table 2 shows the distribution of the 365 manufacturers by industry and country. The results of the ANOVA in Table 3 show no significant differences between this subset and the total sample in terms of size or production process. Therefore, using the subset of complete responses did not bias the conclusions from the statistical analyses which follow.

Table 2 Sample composition (n = 365)
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Table 3 Differences between the used and unused samples
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4.2 Measure development

The measures used in our study were adapted from established scales. Responses were given on a five-point Likert scale. The measurement items, factor loadings, and reliabilities are reported in Table 4.

Table 4 Measurement of all constructs
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The existing approaches to measuring empowerment within a business context fall into two broad types: the relational/organizational perspective and the motivational/psychological perspective (Ahearne et al. 2005; Spreitzer et al. 1997). Organizational empowerment denotes a set of activities associated with giving employees more decision-making authority, and psychological empowerment refers to an intrinsic motivational state. As our unit of analysis was at the organizational level, we used the organizational empowerment perspective in this study. However, progress in developing organizational empowerment constructs has not been comparable with the development of psychological empowerment constructs. Matthews et al. (2003) developed an organizational empowerment scale by identifying three key organizational practices associated with empowerment: dynamic structure framework, control of workplace decisions, and fluidity in information sharing. Because our study was part of a global project focusing on manufacturing strategy and performance, we used a shortened scale of organizational empowerment. Four items, adapted from Matthews et al. (2003) and Nauta et al. (2010) were used to measure organizational empowerment. The Cronbach’s alpha of this construct was 0.80.

Service strategy was defined as the scope and extent to which services were offered by manufacturers. We focused on product-based services such as maintenance of products sold to customers, product upgrades, repairs, spare parts, and training. Five items adapted from Mathieu (2001), Homburg et al. (2003), and Gebauer (2007, 2008) were used to measure the service strategies of the manufacturers. The Cronbach’s alpha of this construct was 0.85.

Four items were used to measure a firm’s relative business performance (He et al. 2007). These items asked managers to identify their performance levels compared to 3 years ago, based on sales, market share, return on sales, and return on investment. The Cronbach’s alpha of this construct was 0.88.

Our analysis incorporated organizational size as a control variable that can affect a firm’s business performance, as large firms are likely to invest more resources to improve performance. SIZE was measured by the number of employees in the business unit. The participants were asked “At the end of the last fiscal year, how many employees were in your business unit in total?” We used the frequency of introducing new products to measure technological change. Responses were given in five-point Likert format, with 1 meaning “hardly ever” and 5 meaning “frequently.” Competition intensity was directly measured by each respondent’s perception, that is, “How do you perceive the competition intensity?” In this case, 1 meant “low intensity” and 5 meant “high intensity.”

4.3 Validation of measures

We followed a two-step approach (Anderson and Gerbing 1988) to test our hypotheses. In step 1, we established the validity and reliability of the scales by testing the measurement model. In step 2, we tested the structural relationships developed in our study. The reliability of the scales was measured by Cronbach’s alpha and all values ranged between 0.80 and 0.88 (Table 4). Usually, a Cronbach’s alpha of 0.7 or above is suggested as the basic requirement for demonstrating the internal consistency of established scales (Bagozzi and Yi 1988). Confirmatory factor analyses were used to assess convergent and discriminant validity of the measures with SEM in AMOS 20.0. The measurement model fit the data satisfactorily (χ 2/df = 1.47, NFI = 0.95, RFI = 0.93, RMSEA = 0.04, TLI = 0.98, CFI = 0.98). All factor loadings were highly significant (p < 0.01), which indicated the unidimensionality of the measures (Anderson and Gerbing 1988). Convergent validity was assessed using the standardized parameter loadings of the measurement items on their respective constructs. All standardized parameter loadings were significant (p value < 0.01), and ranged from 0.59 to 0.93 (Table 4). This result provided strong support for convergent validity. The composite reliabilities, which ranged from 0.80 to 0.87, exceeded 0.70, implying that the variance captured by the factors was significantly more than the variance indicated by the error components. Next, we assessed the discriminant validity of all three latent constructs. Discriminant validity was evaluated by comparing the average variance extracted (AVE) to the squared correlation between the constructs (Fornell and Larcker 1981). Fornell and Larcker proposed that the square root of the AVE for constructs should be greater than the correlation between them. Table 5 shows the means, standard deviations, correlations between constructs, composite reliability, and AVE. Taken together, these results indicated that the measures used in this study possessed adequate reliability and validity.

Table 5 Discriminant validity
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5 Data analysis and results

The results of the SEM with standardized regression weights are shown in Fig. 2. Overall, the model fit the data very well (χ 2/df = 1.52, NFI = 0.94, RFI = 0.93, IFI = 0.98, TLI = 0.98, CFI = 0.98, RMSEA = 0.04), and all paths were significant at the 0.01 or 0.05 level.

Fig. 2
figure 2

Structural equation modeling results

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Figure 2 illustrates that service strategy was positively related to business performance (its standard coefficient was 0.13, with a significance level of 0.05), which supports H1. Organizational empowerment was positively related to service strategy (its standard coefficient was 0.30, with a significance level of 0.01), thus providing support for H3.

Empirical techniques for evaluating moderating effects include moderated regression analysis and multiple group analysis. Between these options, we considered multi-group analysis in AMOS to be a more appropriate method for our study, because this method considers relationships among latent constructs. We examined the moderating role of technological change between organizational empowerment and service strategy. Median splits were conducted in this sample, based on values of technological change. Multiple group analysis was performed to compare two subsamples, one with high and the other with low values of technological change. More specifically, we compared two models that were different only with respect to the effect of organizational empowerment on service strategy. One model restricted this parameter to be equal across groups, whereas the more general model allowed this parameter to vary across groups. Significance can be assessed on the basis of improvement in χ 2 when moving from the restricted to the more general model by the use of a χ 2 distribution with one degree of freedom. Table 6 shows that the χ 2 difference was 4.42, and was significant at the 95 % level. CFI and RMSEA were the same for both models. Therefore, H4 was supported.

Table 6 Multi-group SEM results of testing the effect of technological change on organizational empowerment → service strategy
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In looking at the standardized parameter estimates for TF model results, we found that the organizational empowerment → service strategy relationship was significant in both groups (p < 0.05). Specifically, the relationship was greater for the high-technological change group, which showed a completely standardized estimate of 0.53, as compared to a completely standardized estimate of 0.22 for the low-technological change group.

We adopted the same method of analysis to examine the moderating role of competition intensity between service strategy and business performance. Table 7 shows the result of multi-group analysis in AMOS. CFI and RMSEA were the same for both models. The Δχ 2 equaled 2.12 with one degree of freedom, and was insignificant. Thus, H2 was not supported.

Table 7 Multi-group SEM results of testing the effect of competition intensity on service strategy → business performance
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6 Discussions

Service provision by manufacturing companies has emerged as a new stream in the service management field. This study contributes to previous work in this field by integrating manufacturing with service provision from the perspective of organizational behavior, and by empirically exploring the relationships between organizational empowerment, service strategy, and business performance in global manufacturing firms.

Our study emphasized one type of industrial service, namely product-based service. The results showed that service strategy in manufacturing companies was positively related to business performance, which is consistent with previous research (Fang et al. 2008; Gebauer and Fleisch 2007; He and Lai 2012; Malleret 2006). Although examples of failure in offering services have been observed, and the costs (such as competitive or political costs) of service business have been evaluated (Fang et al. 2008; Mathieu 2001), service provision can still provide marketing, strategic, and financial benefits for manufacturers. Overall, we expect that the benefits of service provision are usually higher than the costs. However, the moderating role of competition intensity between service strategy and business performance was not supported in our study. Similarly, Fang et al. (2008) used data from US-based publicly traded manufacturing firms and found that industry competition did not significantly moderate the relationship between service ratio and firm value. Although these two studies used different measurements of service, performance, and industry competition, they both indicated an insignificant moderating role of competition intensity. Burger and Cann (1995) and Mathieu (2001) argued that product-based services such as maintenance and repairs are no longer sufficient to guarantee a sustainable competitive advantage in many manufacturing industries. Our results provide empirical evidence to support this argument. As product-based service provision has spread through most manufacturing industries, the distinctiveness of such service has eroded, and offering product-based service has become a new minimum requirement for manufacturers. Many industrial manufacturers regard product-based service as an essential practice, as seen in “Xerox Support,” “Philips Product Solutions,” “Boeing Lifecycle Support,” “Dell Technical Support,” and “Airbus Global Support” (Oliva and Kallenberg 2003).

Our results indicated that organizational empowerment was positively associated with service strategy in manufacturing companies. Previous studies have examined the positive effects of organizational empowerment in service industries (e.g., Bowen and Lawler 1992; Quinn and Spreitzer 1997). Our findings complement these previous studies by using direct empirical evidence from manufacturers that offer such services. In general, servitization requires that manufacturing companies transform themselves into service-like entities (Kastalli and Looy 2013).

Our results showed that organizational empowerment had an indirect positive influence on business performance, through realizing service strategy. This finding supports the assumption found in previous studies that there are mediators between empowerment and performance that may explain the previous inconsistent results concerning the effects of empowerment on firm performance (Kazlauskaite et al. 2012; Laschinger et al. 2004; Seibert et al. 2004). As Bowen and Lawler (1992) suggested, empowerment might be a more effective practice under certain specific organizational conditions. Our results indicate that the implementation of a certain kind of service strategy may be the mechanism that explains the effect of organizational empowerment. In addition, our results support the theory that technological change has a positive moderating role between organizational empowerment and business performance.

6.1 Contributions

This study makes several theoretical and empirical contributions to understanding the relationships between organizational empowerment, service strategy, and business performance in global manufacturing companies. First, most previous studies have proposed that expanding into the service business has value for manufacturers (Fang et al. 2008; Malleret 2006). However, these studies discussed service at the general level, and failed to address services of different categories in their empirical studies. This approach has neglected to examine how various kinds of services affect firms differently. Our findings contribute to the theory on service provision by manufacturers by focusing on product-based service, and showing that service strategy is positively related to business performance in situations of both high- and low-intensity competition. Second, our study contributes to service theory for manufacturers by exploring the organizational antecedents of service strategy. Our results show that organizational empowerment is the important factor for enabling a service strategy. Third, our study focuses on and enriches our understanding of organizational empowerment, which in the past has been mainly explored in terms the effects of psychological empowerment at the individual level. Previous studies have found an inconsistent relationship between personal empowerment and organizational performance, so that a more comprehensive understanding of how and when empowerment works was needed in this field. Our results indicate that organizational empowerment has an indirect effect on financial performance through the influence of service strategy. This finding, to some degree, explains the previous inconsistency in research findings. The effects of empowerment are found to be effective under some conditions, such as high rates of technological change. Finally, we provide empirical evidence from manufacturing industries across the globe, whereas previous studies have mainly used data from single countries.

6.2 Managerial implications

Service provision in manufacturing companies is difficult, but necessary. As our results reveal, combining tangible products with intangible services is a common trend in global manufacturing industries. After considering the financial, strategic, and marketing benefits, and comparing these against the costs of service provision, we suggest that manufacturing firms should choose a strategy of combining product production with service offerings. Of course the complexity of service strategies in particular manufacturing sectors may make implementation difficult (Mathieu 2001). Therefore, managers need to focus on appropriate categories of service and find the best ways of delivering services. There are certain organizational conditions and contexts necessary to support the service strategies of manufacturers. To extend the service provision business in manufacturing firms requires various adaptations in organizational structure and culture. Because of the unique characteristics of the service business such as continuous interaction with customers, proactive employees are necessary. Managers need to give employees more job autonomy and ensure greater cooperation among different functions.

6.3 Limitations and future directions

This study has certain theoretical and methodological limitations that suggest a variety of future research directions. First, we emphasize product-based service, which is only one type of industrial service. It may be useful for future research to explore the relationship between product-based service and customer supporting service, and to compare the differences in antecedents and outcomes for these two types of services. Each of these types of services requires different organizational configurations (Antioco et al. 2008; Gebauer et al. 2008). Second, organizational empowerment is one of the organizational configurations needed for service provision by manufacturers. One more direction for further research can involve investigations of how the integration of internal organizational configurations and external supply chains affects service management in manufacturing firms.

7 Conclusions

This study examined the relationship between organizational empowerment, service strategy, and business performance in global manufacturing industries. Using reliable and robust IMSS-V data, we found that product-based service strategy was positively related to business performance in environments of both high- and low-intensity competition. Organizational empowerment was positively related to service strategy in manufacturing companies, particularly in companies facing high rates of technological change. From an academic perspective, this study has taken an important empirical step in research on the antecedents of service strategy in global manufacturing industries, particularly in terms of organizational behavior. Furthermore, the methods of SEM and multi-group analysis were introduced to examine the complicated relationships between organizational characteristics, service strategies, and business performance. From a practitioner perspective, our findings suggest that managers should focus on product-based service, which is the most basic strategy for service by manufacturers. At the same time, managers should change some of their firms’ organizational characteristics to support their service strategy, which requires a different business logic than that which applies in managing manufacturing systems.