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International Business Review 17 (2008) 442–451

www.elsevier.com/locate/ibusrev

The role of service embeddedness in the internationalisationprocess of manufacturing firms

Robert Jacka,�, Sharif As-Saberb, Ron Edwardsc, Peter Buckleyd

aFaculty of Business and Enterprise, Swinburne University of Technology, Hawthorn Campus, Hawthorn 3122, AustraliabDepartment of Management, Monash University, Clayton Campus, Clayton 3800, Australia

cSchool of Business and Economics, Monash University, Malaysia Campus, Bandar Sunway 46150, MalaysiadCentre for International Business, University of Leeds, Leeds LS2 9JT, UK

Received 6 July 2005; received in revised form 20 June 2007, 14 October 2007; accepted 2 February 2008

Abstract

Over the last decade the growth of service firms, and their internationalisation, has attracted considerable attention from

researchers, with a special focus on characteristics that distinguish services from goods. However, as the composition of a

firm’s product can contain both good and service elements, this paper argues that it is somewhat misleading to categorise a

product simply as either a ‘good’ or a ‘service’. Manufactured goods often contain client-related services embedded in

them. Further, the nature of these embedded services may vary with respect to their degree of separability of production

and consumption. Based on several case studies of Australian manufacturing subsidiaries in the UK, this paper examines

the impact of inseparable embedded services on a firm’s entry-mode choice. It reveals that the extent and nature of

embedded services have a considerable impact on a firm’s choice of foreign entry mode. The research findings are likely to

contribute to the existing marketing and internationalisation literature.

Crown Copyright r 2008 Published by Elsevier Ltd. All rights reserved.

Keywords: Entry modes; Firm internationalisation; Goods; Embedded services; Product packages; Degree of separability

1. Introduction

Early research into the internationalisation process of firms primarily focused on manufacturing firmsproducing tangible goods (Buckley, Pass, & Prescott, 1992; Clark & Rajaratnam, 1999; Gronroos, 1999;Lovelock, 1999). Subsequently, scholars considered the internationalisation process of service firms, focusingon unique service characteristics (Bell, 1995; Bryson, 2001; Cicic, Patterson, & Shoham, 1999; Patterson,Ruyter, & Wetzels, 1999). In particular, the extent or degree of separability of production and consumptionhas been highlighted as a key difference between a service and a good and an essential determinant of howservices can be delivered to customers in domestic and overseas markets (Erramilli & Rao, 1993; Lovelock &Yip, 1996; Roberts, 1999). However, considerable care is needed to define goods and services. According toDaniels (2000), Dunning (1989), Giarini (1994) and Gronroos (1999) there are few examples ‘pure’ goods or

e front matter Crown Copyright r 2008 Published by Elsevier Ltd. All rights reserved.

usrev.2008.02.006

ing author. Tel.: +61 3 9214 8053; fax: +61 3 9819 2117.

ess: rjack@swin.edu.au (R. Jack).

ARTICLE IN PRESSR. Jack et al. / International Business Review 17 (2008) 442–451 443

services in existence. They argue, rather than relying on simple categorisations of goods and services, it is morerealistic to consider ‘products’ containing combinations of good and service elements. From this perspective,‘product packages’ or ‘offerings’ are the terms used to describe the combination of the good and service-related elements that ‘manufacturers’ tend to offer to their clients. For example, some goods requirecustomised design before they are produced, and may be supported by services such as installation,commissioning, guarantees and post-sales service. A product package containing a tangible good embeddedwith inseparable services may require the firm to interact directly with its customers. Previous studies haverecognised the impact of separability or simultaneity of production and consumption of services on the choiceof a firm’s foreign entry mode. However, they primarily have looked at this issue from a service firmperspective (Cardone-Riportella & Cazorla-Papis, 2001; Clark & Rajaratnam, 1999; Gronroos, 1999;Lovelock, 1999). From a manufacturing firm perspective, this paper seeks to address how the separability ofembedded services affects the firm’s choice of foreign entry mode.

In order to investigate this issue and to allow a more sophisticated understanding of how serviceembeddedness influences the firm internationalisation process, this research adopts a qualitative approach andexamines 18 Australian manufacturing subsidiaries operating in the UK. The research is likely to deepen theunderstanding of product composition, and its impact on internationalisation strategy by examining how thedegree of separability of services embedded in manufactured goods influences the modus operandi chosen bythe firm to enter international markets.

2. Service embeddedness and firm internationalisation: an overview

Researchers have defined a service as an ‘experience’ or ‘action’ that brings about a change in a person or agood (Daniels, 2000; Giarini, 1994; Roberts, 1999; Stare, 2002). Characteristics such as intangibility,inseparability, variability and perishability have been used to make a distinction between services and goods(Berry, 1984; Eiglier, Langeard, Lovelock, Bateson, & Young, 1977; Gabbott & Hogg, 1994; Gronroos, 1999;Ruyter, Birgelen, & Wetzels, 1998). Inseparability of production and consumption has been given particularemphasis as a point of difference (Erramilli & Rao, 1993, Gronroos, 1999; Grubal, 1987). Unlike the separableproduction and consumption associated with a good, a high degree of human interaction is often requiredbetween the provider and the user for a service to be delivered successfully.

Although there is an acknowledgement that goods and services have different characteristics, someresearchers question whether simple distinctions should be made between goods and services and whether theyare mutually exclusive product categories (Bowen, Siehl, & Schneider, 1989; Sanchez-Peinado & Pla-Barber,2006; Shostack, 1977; Vargo & Lusch, 2004; Wyckham, Fitzroy, & Mandry, 1975). These researchers explainthat goods and services may, at times, display similar characteristics. For example, some services do notrequire interactions to be successfully delivered to clients. These services can be embodied in a physical format,such as a computer disk or a consultant’s report, and delivered to clients for their ultimate use. Like a good,these separable services can be firstly produced and later consumed. Services can, therefore, be divided intoseparable and inseparable categories (Erramilli & Rao, 1993; Stare, 2002).

The idea, therefore, of a broader understanding of ‘goods’ and ‘services’ is relevant, as manufacturing firmsoften embed their goods with service elements (Anderson & Narus, 1995; Gronroos, 1990; Lovelock & Yip,1996). For example, in order to remedy defects or to increase the lifespan of a good, a firm may perform post-purchase services. Such service helps to ensure the optimum use of the product and maximises customersatisfaction (Porter, 1985; Robinson, Clarke-Hill, & Clarkson, 2002; Stabell & Fjeldstad, 1998; Walter &Lancaster, 2000). According to Aharoni, (2000), Giarini, (1994), Levitt (1972), and Lichtenthal and Long(1998) the more complex the good the higher the service component.

Embedded services may be responsible for extending the value of a good beyond that of its tangible features.Dunning (1989) links the concept of these services directly to a firm’s achievement and maintenance ofcompetitive advantage, implying that their value adding nature contributes to the firm’s ownership advantage.This perspective is also emphasised by Gronroos (1999,p. 293):

What we see today is that a growing number of manufacturing businesses have to vitalise the serviceelements of their offerings or add new services to goods-based offerings in order to stay competitive.

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The separability of embedded services has important implications for the way a manufacturing firm deliversits product package. Embedded services such as installation, commissioning and some on-going servicesupport require the firm to interact directly with its clients. However, other embedded service components,such as online assistance and printed and digitised instruction materials, may be separable (Ekeledo &Sivakumar, 2004). Manufacturing firms, therefore, may find that their product packages contain goods,separable services and inseparable services. As a result, a manufacturing firm’s productive output can containelements with different ‘degrees of separability’ within one comprehensive product package. Their ‘products’are therefore bundles of separable and inseparable components.

According to Ekeledo and Sivakumar (1998), the nature of a service is considered as a key determinant offoreign market entry-mode choice. Consequently, the extent of embedded services is likely to have an impacton a manufacturing firm’s entry-mode decision. However, the literature on the firm internationalisationprocess is yet to fully recognise the changing perception of product composition. Theories developed toexplain firm internationalisation have focused primarily on manufacturing firms producing goods, withoutgiving much consideration to the service components embedded in them. The assumption is thatmanufacturers produce tangible products.

Both Johanson and Vahlne’s (1977, 1990) Uppsala model and Cavusgil S. Tamer (1980) establishment chainhave been criticised for their lack of applicability to services. As these process models are derived fromempirical research based on the behaviour of manufacturing firms, their underlying assumption is to look intothe delivery of goods across national boundaries (Andersson, 2002; Bridgewater, 1999; Javalgi, Lawson,Gross, & White, 1998; Wilkinson & Brouthers, 2006). When other researchers have considered the relevanceof process models to services, their analysis only included ‘pure’ services (Bell, 1995; Cardone-Riportella,& Cazorla-Papis, 2001; Ekeledo & Sivakumar, 2004; Roberts, 1999; Sharma, 1988; Sharma & Johanson,1987). Their research highlights that product separability is an important factor when designinginternationalisation strategy.

For an inseparable service to be delivered successfully, a firm must skip the export stage when it begins itsinternationalisation process. The product nature, therefore, will prompt a firm to enter into a market directlyvia a contractual arrangement and often through foreign direct investment without following an incrementalapproach to internationalisation. Researchers such as Buckley, Newbould, and Thurwell (1977) and Welchand Luostarinen (1988) have termed these exceptions to the incremental approach to internationalisation as‘leapfrogging’. Such a strategy may also be required by manufacturing firms producing goods with embeddedservices.

However, the extent and the nature of such embeddedness will determine the actual need for any‘leapfrogging’. In this regard, the degree of interaction between the provider of the embedded service and itscustomers is likely to have a bearing on the firm’s entry-mode choice. This is reflected in a study conducted byCardone-Riportella and Cazorla-Papis (2001) that emphasises that the intensity or the level of interactionrequired for service delivery is directly linked to the foreign market entry modes (see Table 1).

This analysis implies that extensive customer interaction (i.e. a product with a low degree of separability)requires a major local presence either through a contractual arrangement (such as licensing and franchising),or through foreign direct investment (Buckley et al., 1992; Ekeledo & Sivakumar, 2004; Erramilli, 1990;Sampson & Snape, 1985).

Still, the research undertaken to analyse the process of internationalisation among service firms assumes adividing line between goods and services, and relies heavily on the presumption of distinctiveness in individual

Table 1

Frequency of interactions and entry mode choice

Producer and customer interaction Mode of entry

Low Export

Medium Alliances and joint ventures

High Foreign direct investment

Adapted from: Cardone-Riportella and Cazorla-Papis (2001).

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Embedded

Degree of separability of

the embedded service

delivery and its

consumption

Core product

(Manufactured good)

Product package

services

Choice of foreign

market entry mode

Fig. 1. A conceptual model of the impact of service embeddedness on entry-mode choice.

R. Jack et al. / International Business Review 17 (2008) 442–451 445

service offerings (Contractor, Kundu, & Hsu, 2003; Gronroos, 1999; Roberts, 1999; Stare, 2002). There hasbeen very little consideration of whether similar service characteristics could also be found in manufacturedgoods, with implications for the manner in which the firm may deliver its products internationally.

The current paper argues that since manufactured goods can be embedded with interactive or inseparableservices to facilitate their use or to enhance their performance, this factor should feature in the theory ofinternationalisation. As manufacturers increasingly develop their products as packages comprising both goodand embedded service components, the efficient delivery of these packages across international markets maydetermine the success of the firm’s internationalisation process. If service firms providing inseparable servicesenter international markets directly, then manufacturers may also require similar entry modes delivering theirproduct packages.

Based on the above discussion, a conceptual model has been developed from a manufacturing firmperspective (see Fig. 1). The model depicts the relationship between the service embeddedness of a coremanufacturing product (manufactured good) and its international entry-mode strategy, with the relationshipmoderated by the degree of separability of the embedded service elements. The model seeks to portraythe manner in which the degree of separability of an embedded service may influence the entry mode thefirm chooses to serve foreign markets. An embedded service with a low degree of separability will necessitatethe firm to interact directly with its customers, thereby requiring the firm to have a direct presence inforeign markets.

3. Research method

The current research aims to explain the role of inseparability of services embedded in manufactured goodsin determining the foreign entry-mode strategy of manufacturing firms. To achieve this objective, the researchmethod must be one that lends itself to both exploration and theory building. This objective makes qualitativeresearch, a particularly attractive research tool as it seeks to explain the relationship between a firm’s productcharacteristics and its internationalisation strategy. It is a complex phenomenon. Understanding such anintricate relationship calls for direct contact with the respondents.

The context of the study is important here. The qualitative method allows researchers to understand thecontext-specific depth of a phenomenon (Bamberger, 2000). This method also allows the researcher toinvestigate a contemporary phenomenon (product composition) within its real-life context (firminternationalisation) (Yin, 2003). As such, it is likely to provide a better understanding of the dynamics of

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the internationalisation strategy pursued by manufacturing firms. A qualitative, case study-based researchtechnique using in-depth, face-to-face interviews can provide a rich, focused and realistic account of theimpact of embedded services on the internationalisation process of manufacturing firms.

Data was collected from 18 UK-based Australian manufacturing subsidiaries. Although there is nocomprehensive directory of Australian manufacturers operating in the UK, organisations such as AustralianBusiness in Europe (ABIE) and the Australian Trade Commission (Austrade) offices in the UK and inAustralia were approached to identify Australian owned manufacturing subsidiaries operating in the UK.Subsequently, a total of 25 Australian-owned manufacturing subsidiaries were identified. Each of these 25firms was then approached to be a part of this research endeavour. Eighteen agreed to participate in the study.The participating firms varied in size with an average of 500 employees. They produce a diverse range of goodsthat include chemicals, food and beverages, building and construction materials and household products.Most of the subsidiaries studied (60%) have been operating in the UK for more than 20 years.

Chief Executive Officers (CEOs) were chosen to be the most appropriate people for the interview, as it wasassumed that they would be able to appreciate the strategic reasons behind the entry-mode decision. Face-to-face, semi-structured interviews were conducted. On average, each of the interviews took 45min and wasrecorded on audiotape. The 18 CEOs were encouraged to elaborate and exemplify their answers. Contentanalysis of words, themes and omissions was performed. For the sake of confidentiality, the identities of theparticipating firms and their CEOs were not revealed.

The interview protocol was designed to gather information in relation to the nature of Australian foreigndirect investment (FDI) in the UK with specific emphasis on the rationale for adopting FDI as an entry mode.It also sought to understand whether service components embedded in the final product offerings had animpact on the entry-mode decision. In doing so, all CEOs were asked to explain the extent of serviceembeddedness and the separability of each of their product offerings. The aim was to ascertain whetherproducing goods with embedded service components required the firms to interact directly and continuouslywith customers. Depending on the nature of the response, these service components were categorised either as‘low’, ‘high’ or ‘medium’ in terms of their degree of separability.

Subsequently, the CEOs were asked whether service embeddedness, and its degree of separability, had animpact on the company’s existing foreign markets entry-mode choice, as well as on future international marketexpansion.

4. Findings and discussion

Table 2 represents a summary of findings based on the interview data in relation to the perceived impact ofservice embeddedness and entry-mode choice. Columns II, III and IV provide some understanding withrespect to the nature and characteristics of the product packages offered by the UK subsidiaries.

Column II identifies the type of manufactured good (core product) produced by each subsidiary. ColumnIII indicates the client-related service characteristics embedded in manufactured goods. Twelve firms, or two-thirds of the respondents, identified service components embedded in, or with, their core product(manufactured good). The remaining six firms did not consider embedded services as a significant featureof their product. The service element was, at most, minimal and had no influence on their delivery options.

The embedded service components range from the installation of the product (subsidiaries 1, 3 and 17) tospecialist advice (subsidiaries 2, 5, 8, 11, 12, 14, 15, and 18). For four of the firms (subsidiaries 11, 12, 15 and18), this specialist advice involves the firm interacting directly with customers. In one case (subsidiary 5), itinvolves interacting with alliance partners who are responsible for installing the manufactured good.

Based on findings listed in Columns II and III, Column IV describes the degree of separability of theembedded service. Of the 12 firms with embedded service components, 10 firms clearly reveal that they have tointeract directly, and often continuously, with their users (subsidiaries 2, 3, 5, 8, 11, 12, 14, 15, 17 and 18).Accordingly, the degree of separability of these embedded services is classified as ‘low’. The remaining twofirms (subsidiaries 1 and 4) offer goods with embedded service components which did not require any suchinteractions (these include written/digitised operating instructions). Consequently, the degree of separability ofthese embedded services is classified as ‘high’. Despite an expectation from the researchers of having responsesfalling in between the two (‘medium’), no respondent indicated the degree of separability as being ‘medium’.

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Table 2

Impact of service embeddedness on entry mode choice of Australian manufacturing firms operating in the UK

I II III IV V VI

Australian

manufacturing

subsidiaries in

the UK

Product package Degree of

separability

embedded

service

Effect on entry

mode choice

Effect on

future market

expansionType of manufactured

good

Type of embedded service

1 Outdoor household

equipment

Written installation

instructions

High No No

2 Plumbing products Installation and expert advice Low Yes Yes

3 Outdoor household

equipment

Installation Low Yes Yes

4 Furnishing Written instructions High No No

5 Safety equipment Advice given to installers of

the firms products

Low Yes Yes

6 Concrete products Minimal N/A No No

7 Concrete products Minimal N/A No No

8 Chemicals Specialist advice Low Yes Yes

9 Minerals Minimal N/A No No

10 Brewing Minimal N/A No No

11 Chemicals Specialist advice Low Yes Yes

12 Safety equipment Specialist advice Low Yes Yes

13 Food ingredients Minimal N/A No No

14 Chemicals Specialist advice Low Yes Yes

15 Plumbing Specialist engineering advice Low Yes Yes

16 Concrete products Minimal N/A No No

17 Outdoor household

equipment

Delivery and installation Low Yes Yes

18 Electrical products Professional advice Low Yes Yes

N/A ¼ not applicable.

R. Jack et al. / International Business Review 17 (2008) 442–451 447

The importance of embedded service components with a ‘low’ degree of separability was highlighted by the10 firms as forming an essential part of their product offerings. Some went even further and considered it asthe most important element of their product packages and their market positioning. One of the respondentsreflected this view in the following manner:

The critical factor is sales and service. The manufacturing component is fairly low. The major limit on thecompany’s growth is not manufacturing capacity but availability of sales/support people to visit thecustomer’s premises to fix problems (subsidiary 11).

A good with a set of complex technical and operating features may require constant interaction between itsproducer and end users. Sometimes, the development of a product may also require a customer’s opinion,particularly with custom-made products. In such cases, simple instruction booklets are not enough to meet acustomer’s needs. This is reflected in a comment made by the respondent from subsidiary 18 (an electricalproduct manufacturer):

The customers expect us to do the development work on their behalf. We couldn’t just advise them on howto simplify their electrical systems. Ongoing consultation is an essential requirement of our product supportsystem. Our engineers talk to theirs a lot. This sort of free service is essential to our product. It is not just asupply operation.

Product packages offered by subsidiaries 3 and 17 include not only manufacturing the goods to customers’specifications, but also installation of the good within a desired time frame. Both firms assess this embedded

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service as a key success factor in the UK market. In this regard, the respondent from subsidiary 17 mentioned:

We tend to be more service oriented than English companies. We deliver service in two different ways—wedeliver and install the product, and if a customer is having trouble we will be there within 48 h.

This approach is consistent with the marketing literature which explains that manufactured products aretypically surrounded by supplementary or embedded services (Anderson & Narus, 1995; Daniels, 2000;Giarini, 1994; Gronroos, 1999; Illeris, 1996). The research highlights the importance firms place on servicesthat complement the manufactured goods they produce.

Column V indicates whether embedded services influenced the firm’s choice of entry mode when entering theUK market. Column VI provides an assessment of the importance of the service component in any futuremarket expansion and possible entry mode. Columns V and VI, thereby, assist in the analysis by highlightingthe relationship between the degree of separability of embedded services and entry-mode choice.

All 10 firms with inseparable embedded service components had necessarily accommodated theinseparability when choosing their respective foreign entry modes (Columns IV and V). The respondentsrepresenting these 10 firms stated that despite being a manufacturer of tangible ‘goods’, inseparable serviceactivities embedded in the core products required them to interact directly with their customers. The need forsuch on-going interaction was emphasised by one of the respondents (subsidiary 5):

A problem with producing in Australia (and selling it in the UK) is the time delay. Given our product type(safety equipment), we need to be ever vigilant of the workmanship and the delivery and installation of theproduct. Very often installers need an answer to a problem immediately. The installer has a lot of responsibility.However, a close supervision of the job and contacts with customers are often needed for a quality outcome.

A similar view was expressed in response from another CEO (subsidiary 3) who emphasised that it had beenthe importance of the delivery of the product package, (inclusive of inseparable embedded services) within astipulated period of time that had prompted the firm to establish a subsidiary in the UK. This firm observes arule—complete the task of any installation or repair service within 2 weeks of the first order/complaint fromthe customer.

In summary, firms with product packages containing a low degree of service separability had to establishforeign facilities using a direct entry mode to supply their products efficiently. This finding is consistent withliterature on how product characteristics affect a firm’s internationalisation strategy. Researchers (Bryson,2001; Cardone-Riportella & Cazorla-Papis, 2001; Cicic et al., 1999; Erramilli & Rao, 1993; Stare, 2002; Welch& Luostarinen, 1988) have concluded that inseparability of production and consumption, i.e. a high level ofinteraction between the provider and the user, may require a direct presence in a foreign market. Thesecircumstances restrain the firm from adopting any arm’s length arrangements such as exporting.Manufacturers with highly inseparable, embedded service components in their products must also enterforeign markets directly. One of the respondents (subsidiary 5) emphasised the importance of proximity ofproduction facilities to the end users because of the delivery of inseparable embedded services:

ylimits apply to how far we can extend our service. It only takes a day to get our people to any onecustomer in Europe (from our UK base).

Further information was sought from respondents regarding the role of service embeddedness in their entry-mode decisions for future foreign market expansion (other than the UK). As indicated in Column VI, the sameset of 10 firms with inseparable embedded service components revealed that future entry-mode decisionswould be affected by the inseparability of their embedded services.

The 10 firms that described their embedded services as inseparable stated that the inseparability was theprimary reason for choosing FDI as their entry mode in the UK market. The results support the conceptualmodel by highlighting the relationship between the service embeddedness of a product and the firm’s entrymode, and this is moderated by the degree of separability of the embedded service element. This finding isconsistent with studies conducted by Edwards and Buckley (1998) and Turnbill (1987) that emphasised theimportance of strategic decision making as one of the determinants of a firm’s entry-mode choice. The firmsstated that embedded services comprised an essential part of their product package and explained that this wasan important strategic consideration in their choice of foreign market entry mode. The research findings

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suggest that the presence of inseparable embedded service components in a manufactured good makeexporting inappropriate.

As such, the research provides a more comprehensive understanding of products as a package(incorporating both good and service components) and recognised the role that service embeddedness playsin the choice of foreign entry mode. From this perspective, this research adds a new dimension to themarketing and international business literature.

5. Limitations

The limited population of Australian manufacturing subsidiaries in the UK (25) made it possible to adopt aqualitative survey. However, of the 25 subsidiaries identified by the researchers, the reluctance of seven firmsto participate made the number even smaller (18). Therefore, the firm level data has been sourced from arelatively small number of manufacturing firms within a one-country setting, compromising thegeneralisability of the research findings.

6. Future research direction and academic and managerial implications

The current research aims to enrich the literature on the firm internationalisation process by giving dueemphasis to the concept of service embeddedness in products, the degree of separability of these serviceelements, and how this may influence the internationalisation of the firm. The major theories developed toexplain the internationalisation of firms have been focused either on manufacturing or service firms. Severalresearchers have proposed that characteristics unique to certain services may mean that traditionalinternationalisation theories have little or no relevance to specific service sectors. Consequently, the currentresearch seeks to address this challenge. It aims to look beyond simple distinctions between goods and servicesto a more comprehensive concept of product packages, and uses this concept to provide a betterunderstanding of the internationalisation process of firms.

The goal for future research will be to use the conceptual model as a basis for further empirical studiesinvolving international manufacturing and service firms. The research findings would allow the commissioningof a more detailed and comprehensive analysis involving a larger number of firms in more than one country.Such research would also pave the way for data triangulation and greater generalisability. Future researchmay also attempt to compare and contrast varying degrees of separability across both manufacturing andservice firms and their impact on the internationalisation process. In order to capture a more comprehensiveview of how embedded service components influence the firm’s internationalisation process, the research mayalso be extended to include firms at various stages of internationalisation, viz., exporting, strategic alliancesincluding joint ventures and FDI. Industry-specific variations with respect to service embeddedness alsowarrant study.

The research findings also have important managerial implications. The choice of an appropriate entrymode has a direct bearing on a firm’s success in a foreign location (Terpstra & Sarathy 1994; Root, 1994).Managers need to give careful consideration to the successful delivery of all components of their productpackaged when assessing international markets for entry.

7. Conclusion

In the internationalisation literature a distinction between goods and services is often made and theattributes that differentiate services from goods are emphasised. However, it is somewhat misleading toclassify a product simply either as a ‘good’ or a ‘service’. Rather, it is important to understand that productofferings often contain both good and service components. In this regard, a good may contain embeddedservice components. These service components could be categorised by their degree of separability dependingon the interaction required between the provider and the user of the service. Previous studies have recognisedthe impact of such separability or simultaneity of production and consumption on the choice of entry mode.However, they have focused on this issue from a service firm perspective. The current paper has considered

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separability from a manufacturing firm perspective and has sought to address how the separability of servicesembedded in a good affects the firm’s choice of foreign entry mode.

In order to systematically address the issue, the authors have developed a conceptual model highlighting theimpact of service embeddedness on a manufacturing firm’s foreign entry-mode choice. The model aims toportray the relationship between services embedded in a core manufacturing product (manufactured good),and the firm’s internationalisation strategy with the relationship moderated by the degree of separability of theservice elements.

Using a qualitative method, and based on interview data from 18 Australian owned manufacturingsubsidiaries in the UK, the current research finds that the degree of separability of services embedded inmanufactured goods may have significant impact on entry-mode choice. The research attempted to explore anarea previously ignored by the marketing and internationalisation literature. The research findings contributeto the existing marketing and internationalisation literature, and have implications for future research and themanner in which manufacturing firms choose to deliver their product offerings in foreign markets.

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