Firm Strategy In Shifting To Service-Oriented Manufacturing – The Case Of Japan’s Electrical Machinery Industry | Chihiro Watanabe & Jae Yong Hur

Shifting to service-oriented manufacturing is a potential survival strategy for manufacturing industry firms facing a paradigm shift from an industrial society to an information society. However, due to the intangible nature of the gross value of firm, the development of such a strategy is rather complicated, often leading to an unsatisfactory performance trajectory. Technological knowledge stock is considered a significant contributor to the gross value of firm, and is proportional to the level of R&D investment. However, due to economic stagnation, R&D investment has declined in recent years, leading to a greater need for effective utilization of potential resources in innovation. In this regard, a strategy that contributes to increased marginal productivity of technology has become a crucial issue for firm strategy in a business environment increasingly characterized by megacompetition. In light of the above, this paper attempts to identify a suitable strategy for shifting to service- oriented manufacturing by examining Japan?s electrical machinery industry over the last two decades. First, a new approach for measuring the gross value of firm based on investor/customer evaluations in the marketplace is introduced. Second, the correlation between the value of services ratio and marginal productivity of technology is analyzed. Finally, a new trajectory to increase marginal productivity is identified to explore the potential of a shift to service-oriented manufacturing.