Service-dominant orientation, dynamic capabilities and firm performance

The purpose of this paper is to investigate the effects of a firm’s service-dominant orientation on marketing and technological capabilities, and its performance. It outlines how a service-dominant orientation offers guidance for the development and deployment of ordinary capabilities, and indirectly affects performance. Additionally, it delineates how dynamic capabilities affect the impact of a service-dominant orientation on ordinary capabilities.

Partial least squares structural equation modeling drawing on data from 228 firms serves to assess hypotheses relating service-dominant orientation and dynamic capabilities with firm performance.

The results indicate that marketing and technological capabilities fully mediate the relationship between a firm’s service-dominant orientation and firm performance. Furthermore, the positive marginal effect of a firm’s service-dominant orientation on its marketing capabilities increases with the firm displaying a stronger service-dominant orientation. In addition, the positive effect of service-dominant orientation on marketing capabilities reduces the more the firm deploys dynamic capabilities.

Because of the cross-sectional sample, future studies could adopt longitudinal research designs to explore the impact of a service-dominant orientation on ordinary capabilities and performance, or investigate the applicability of the findings in other contexts.

The findings imply that implementing a service-dominant orientation can be beneficial for firms. However, because the impact of such an orientation weakens the greater a firm’s dynamic capabilities, managers need to be mindful of this trade-off.

The study is the first to establish a link between the dynamic capability view, originating from strategy research, and service-dominant logic, stemming from marketing thinking.