Business-to-Business Service Innovations (B2B-SIs) have a greater positive effect on firm value than Business-to-Consumer Service Innovations (B2C-SIs). At the same time, they don’t raise firm risk as much as B2C-SIs.
Business-to-Business Service Innovations (B2B-SIs) interact with product innovations to enhance firm value.
Business-to-Business Service Innovations (B2B-SIs) and customer-focus innovations interact to have a marginally negative interaction effect on firm value.
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Dotzel, Thomas and Venkatesh Shankar, “The Relative Effects of B2B (vs. B2C) Service Innovations on Firm Value and Firm Risk: An Empirical Analysis,” (2019). Journal of Marketing, 83(5), 133-152.
The global economy is becoming increasingly service-driven. Business-to-business (B2B) commerce dwarfs business-to-consumer (B2C) commerce. B2B firms are constantly seeking to introduce service innovations (SIs) to improve firm value. But they are unsure about B2B-SIs’ effects on firm value or firm risk, especially relative to those of B2C-SIs, because many firms introduce both B2B-SIs and B2C-SIs and need to better allocate their resources. We address these issues by developing hypotheses that relate the number of B2B-SIs and B2C-SIs to firm value and firm risk together with the moderators, the number of product innovations and customer-focus innovations. To test the hypotheses, we develop and estimate a model using unique panel data of 2,263 service innovations across 15 industries over eight years assembled from multiple data sources, controlling for firm- and market-specific factors, heterogeneity, and endogeneity. We analyze innovation announcements using natural language processing (NLP) to gather data on the quality of innovations. The results show that B2B-SIs have a positive effect on firm value and an insignificant influence on firm risk. Importantly, the effect of a B2B-SI on firm value is significantly greater than that of a B2C-SI. Unlike B2C-SIs, the effect of B2B-SIs on firm value is greater when the firm has more product innovations. However, surprisingly, unlike B2C-SIs, the effect of B2B-SIs on firm value is less positive when the SIs emphasize customers. The effects of B2B-SIs and B2C-SIs on firm risk vary across industries. Our findings offer executives important insights about the relative value of B2B service innovations.
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