How should a capital-constrained servicizing manufacturer search for financing? The impact of supply chain leadership

Servicization is an emerging business paradigm that entails selling services along with physical goods. Money is paid for the utility value derived from using the product. To ensure the product runs well, the servicizing manufacturer bears the cost for operating it. We establish a Stackelberg game to investigate the interaction between a manufacturer and an operator using the product provided by the manufacturer. As a servicizing firm, the manufacturer is more likely to be capital-constrained. When the manufacturer has to raise funds for the production, it has two channels: external financing, which means raising funds from a bank, and internal financing, which means raising funds from the operator. Both the manufacturer and the operator may act as the leader under external financing, while under internal financing, the operator always moves first. We find that under external financing, moving first is not always beneficial. Also, high operating efficiency benefits both chain members when the manufacturer is the leader, but both are hurt when the operator leads. We find that it can be optimal to provide a subsidy not only when the operating efficiency is low but also when it is very high. Furthermore, when the per-unit price is high, the manufacturer should accept a high interest rate to facilitate earning more profit.