Abstract: Manufacturing firms are increasingly transforming from manufacturing of products to provision of services, namely undergoing innovation of servitization. The goal of this paper is to provide new evidence for this servitization of eastern and central regions of China’s manufacturing industry and test previous findings based on case studies with a large, firm-level data set. The empirical analysis results indicate that service turnover of manufacturing firms is still small compared with that of physical products. Regional differences play only a minor role in explaining the degree of servitization. Firm size is of more relevance. Results reveal an inverse U-shaped relationship between firm size and servitization which points to advantages of medium size firms in servitization. Moreover, servitization is positively related to product complexity and the likelihood that the firm introduces product innovation.

Key words:  servitization, technological innovation, enterprise scale, product complexity