Does buyers' dependence translate into financial performance? An empirical analysis of manufacturer-service provider relationships

Drawing upon supply chain management research and the theoretical lens of relational embeddedness, our study develops the hypothesis of an inverted U-shaped relationship between the dependence of a third-party provider of service related to a servitized manufacturer’s product(s) and the manufacturer’s financial performance. This proposition is tested empirically using financial-statement-based data from 190 manufacturer-service provider relationships. The results confirm the presumed diminishing returns of service provider’s dependence. They further show that the economic effects of dependence concern the manufacturer’s ability to profit from sales (as measured by ROS) as well as the ability to generate sales (as measured by ATO).