Firm Transitions from Products to Services and Mode of Entry

The paper develops a two-step approach to identify factors driving the propensity of product firms to enter services, and the mode of entry. We posit that the level of vertical integration, market size and the position of the firm´s product offerings in the phase of the product development lifecycle influence the propensity of entry into services. The mode of entry is a choice between firms exploiting its existing capabilities to enter services through organic growth or that of exploring for new avenues in the form of alliances or acquisitions (March, 1991). At this second step, we posit that the firm status, presence of industry standards and the degree of modularity in the firm´s product offerings drive the decision on the mode of entry.