Services in Manufacturing Industries: Contributions to Quality and Competition

Motivated by the increasingly important role of services in manufacturing industries, this dissertation examines implications of this trend for quality management and competition by firms engaged in the production of joint product-service offerings. Broadly defined, we study the following research questions: How do the service contracts offered by manufacturers affect product quality? How does consumer demand respond to product quality and service attributes when manufacturers compete on services? How are consumer intentions influenced by product quality and service quality perceptions, and how does consumer heterogeneity influence this relationship? We empirically study these questions in the aerospace, automobile and consumer electronics industries, respectively. In the first study, we examine the impact of Performance-Based Contracting on product reliability in an application in the aerospace industry (aircraft engines), and show that the incentive alignment induced by performance-based contracts positively influences product reliability by different mechanisms. In the second essay, we formulate and estimate a structural model to analyze the impact of service competition and product quality in the U.S. automobile industry. We show that the impact of service attributes (warranty length, service quality) on consumer demand critically depends on the firm\u27s product quality. Finally, in the third essay (consumer electronics industry), we examine the joint influence of product quality and service quality perceptions on consumer intentions toward a brand, and show that consumer heterogeneity plays a significant role in defining this relationship. Collectively, our results suggest that the joint consideration of product and service is essential for the development of an effective competitive strategy and for the management of quality by manufacturing firms

Risk management in everyday insurance decisions: Evidence from a process tracing study

This study examined the applicability of Huber's (1997) model of risk management to a real world consumer insurance decision, namely whether to insure a recently purchased item against possible mechanical breakdown in the future. Huber argued that decision makers manage the risks of negative outcomes by applying one or more defusing operators. Respondents in this study asked for whatever information they felt necessary to decide whether to take out an extended warranty on two consumer products of differing values. We found support for most aspects of the model, particularly in relation to risk defusing operators, but also identified some respondents who could not easily be accommodated within it, i.e. those who perceived risk, but did not seem prepared to take any action. We also found evidence for recognition primed insurance decisions. The results are interpreted from a bounded rationality perspective