The Strategy and Its Evolution Trajectory of Product Innovation and Servitization: An Empirical Study of Manufacturing SMEs in Taiwan

Product innovation has been a crucial strategy for manufacturing companies. However, drastic changes in the global economy have led to declining profits from products alone. In response, modern manufacturers have embraced the “servitization” strategy, combining product and service innovations to enhance sales opportunities. Previous research primarily focused on the relationship between product innovation and servitization in large manufacturing enterprises, neglecting small and medium enterprises (SMEs), despite certain SMEs excelling in implementing these strategies. To address this research gap, this study conducted a large-scale empirical investigation to explore the strategies of product innovation and servitization, as well as their evolutionary trajectory. The study analyzed 96 manufacturing companies that received the Taiwan SME Innovation Research Award over the past decade. It identified four distinct strategies based on the innovativeness level of product innovation and the extent of value-added services, uncovering two levels of evolutionary trajectory and associated progression patterns among SMEs. Furthermore, the research examined the impact of industry sector differences on the evolutionary trajectory of SMEs. This study offers a dual contribution: academically, addressing the previously understated role of SMEs in the context of product innovation and servitization; practically, providing valuable reference models for SMEs seeking to implement these strategies.