DS-OP.docx

Many manufacturing companies use Digital Servitization (DS) to achieve competitive differentiation and business model innovation. However, although DS is theoretically recognized to enhance firms' market adaptability and profitability, its actual impact on productivity remains controversial. This study systematically analyses the direct effect of DS on operational efficiency and the moderating role of Dynamic Capabilities (DC) based on panel data of manufacturing firms in the EU15 over the period from 2018 to 2023, using text mining, Data Envelopment Analysis (DEA), and econometric methods. It is found that DS is significantly negatively associated with operational productivity, suggesting that DS may lead to short-term productivity loss due to resource conflict and organisational complexity. In addition, Innovation capability may amplify this negative effect. Large firms facing greater efficiency risk due to path dependence and resource coordination difficulties. This study provides empirical support for the theoretical exploration of the relationship between DS and operational productivity, as well as practical guidance for manufacturing firms to balance short-term efficiency and long-term market competitive advantage in DS context. The study also highlights the value of the combination of dynamic capabilities and organisational ambidexterity theories in explaining the DS paradox.