Internalisation or externalisation? Examining organisational arrangements for industrial services

Purpose - Manufacturing firms primarily organise service provision internally, externally or through a hybrid arrangement. This paper aims to analyse how firm-, offering-, and market-specific factors influence the way in which a firm organises its service provision. In addition, the paper analyses the specific challenges that each organisational arrangement presents for a firm. Design/methodology/approach - The study employed a qualitative, multiple-case research design that involved seven manufacturing firms with different organisational arrangements for service provision. Findings - Contrary to certain explicit assumptions, few firms organise for service provision solely through an in-house organisation. Analysis of firms in a wide variety of industries has shown that the organisational arrangements (internal, external or hybrid configuration) are contingent on factors such as market strategy, customer relationships, product-service linkages, internal competences and market channel characteristics. Research limitations/implications - The paper is an initial attempt to understand the strategic choices that firms make in terms of inter-organisational arrangements for service provision. The research should be extended by way of a cross-sectional survey in order to test and further validate the importance of the determinants of the organisational arrangements for service provision. Originality/value - The paper contributes to the service marketing and management literature by examining factors that determine whether firms organise for service provision internally, externally or through a hybrid configuration. Prior research has not explicitly addressed this issue.