Do More Services Lead to Better Buyer–Supplier Relationships? The Unintended Consequence of Manufacturing Firms Providing Customer Solutions

Abstract

The literature has highlighted the value of the solution business model for manufacturing firms. In this research, we investigate the dark side of providing customer solutions and challenge an assumption held by extant research: That shifting from selling individual products to providing customer solutions enhances buyer–supplier relationships. Drawing on the frame problem view and expectation-(dis) confirmation theory, we examine the impact of provision of customer solutions on customer default. We also explore contingent factors that either magnify or mitigate this effect. Using a longitudinal dataset of 2,218 observations from 446 Chinese listed firms between 2012 and 2020, we find that provision of customer solutions increases the likelihood of customer default. Moreover, we show that this positive impact is stronger in industries with higher turbulence and for firms with greater advertising intensity, but weaker for firms with stronger operational capability. These findings suggest that provision of customer solutions can damage buyer–supplier relationships by reducing the likelihood of meeting customer expectations and increasing transaction disputes.