Do the servitization of manufacturing inputs and outputs have the same impact on carbon emission efficiency? Evidence from the “Belt and Road” Initiative

The global effort to curb climate change hinges on a single, stubborn reality: the way we make things. Manufacturing is the primary engine of carbon emissions, the heavy industry that powers our economies but also heats our planet. For decades, the hope has been that simply making things more efficiently would solve the problem. But a newer idea has taken hold among economists and policymakers: perhaps the solution lies not just in making better products, but in changing what we sell. This concept, known as "servitization," suggests that factories should stop selling just physical goods and start selling the services that come with them. Instead of selling a machine, a company might sell the guarantee of its performance; instead of selling a lightbulb, they might sell the light itself. The theory is that when a company owns the service, they have a financial incentive to make the product last longer, use less energy, and be easier to repair. It sounds like a win-win for the economy and the environment.

However, the path from theory to reality is rarely a straight line. The transition from selling heavy, energy-intensive goods to selling intangible services involves a complex reshuffling of how businesses operate, how they buy materials, and how they manage their supply chains. It is a massive structural shift that could either unlock a new era of green efficiency or, paradoxically, create new environmental headaches. Understanding whether this shift actually helps the planet requires looking past the promise of the idea and examining the messy, often contradictory data of real-world economies. This is the challenge faced by researchers studying the "Belt and Road" Initiative, a vast network of countries connecting Asia, Europe, and Africa, where the industrial landscape is shifting rapidly.

A team of researchers from Wuzhou University and Guangxi University set out to answer a critical question: does this shift toward selling services actually make manufacturing cleaner? They focused on 54 countries involved in the Belt and Road Initiative, analyzing data from 2014 to 2021. To get a clear picture, they did not just look at how much carbon a country emitted; they measured "carbon emission efficiency," a metric that compares the amount of pollution produced against the economic value created. They examined two distinct ways companies can become more service-oriented. The first is "input servitization," where a factory starts buying more services—like design, software, or logistics—to help it make its products. The second is "output servitization," where a factory starts selling more services alongside its physical goods, such as maintenance contracts or leasing arrangements.

The researchers expected to find that these changes would lead to cleaner production. The logic was sound: services are generally less polluting than heavy industry, so replacing physical inputs with knowledge and services should lower the carbon footprint. Yet, the data told a different, more complicated story. The study found that, in the current stage of development for these countries, moving toward servitization actually made manufacturing less efficient at reducing carbon emissions. Both buying more services and selling more services were linked to a drop in carbon efficiency. The researchers describe this as a "green cost" or a "transformation pain." It appears that in the early stages of this shift, the disruption to the system outweighs the benefits. The factories are trying to adapt, but the transition itself is generating extra waste and energy use.

The study digs deeper to explain why this is happening. When factories start buying more services, they often find that their costs go up, not down. They end up investing heavily in new equipment to handle these services, and their warehouses fill up with more inventory because the supply chains become more complex and harder to manage. This creates a bottleneck: the factory is spending more money and using more energy to coordinate these new service layers, which temporarily drags down its environmental performance. Similarly, when factories try to sell more services, they often get stuck in low-value activities. Instead of moving up the ladder to high-tech design or branding, many companies in these regions are simply adding basic after-sales support or transportation services. This keeps them locked into a low-value, high-pollution cycle where the new services do not generate enough economic value to justify the extra carbon they produce.

The researchers also discovered that this negative trend is not permanent; it follows a U-shaped curve. This means that the initial dip in efficiency is likely just a temporary phase. As countries and companies gain experience and cross a certain threshold, the benefits of servitization are expected to kick in. Once the transition is mature, the efficiency gains from better design, longer product lifespans, and smarter resource use should begin to outweigh the initial costs. The study suggests that the current "pain" is a necessary growing period, but it is a period that requires careful management to avoid getting stuck.

Crucially, the research shows that the outcome depends heavily on the quality of the services involved. If a country's factories are buying high-quality, knowledge-intensive services—like advanced engineering, digital management, or green technology consulting—the negative impact on carbon efficiency is significantly reduced. In these cases, the services act as a powerful tool for improvement rather than a burden. Conversely, if the services are low-quality or if the manufacturing sector itself is stuck in low-value production, the environmental damage is more severe. The income level of the country also matters. In upper-middle-income countries, which are often in the thick of industrialization, the shift to services has caused the biggest drop in efficiency. In contrast, in low-income countries, even a small increase in service inputs has actually helped improve efficiency, likely because any move away from pure, unmanaged production brings immediate gains.

The findings offer a sobering but necessary reality check for policymakers. The idea that simply shifting to a service-based economy will automatically solve climate change is a myth. The transition is fraught with obstacles, and without the right support, it can make things worse before they get better. The researchers argue that to navigate this "green cost," countries need to focus on the quality of the services they adopt. They should encourage factories to buy high-tech, knowledge-based services rather than just basic logistics. They need to help companies move up the value chain so that the services they sell are high-value and low-carbon. Furthermore, international cooperation is essential. Wealthier nations with advanced green technologies should help their partners leapfrog the messy, inefficient early stages of this transition, providing the tools and knowledge needed to make the shift smoother and cleaner.

Ultimately, the study confirms that the path to a sustainable future is not a straight line. The journey from selling things to selling services is a complex restructuring of the global economy. It involves a period of friction where old systems break down and new ones are not yet fully efficient. But the data suggests that if countries can push through this difficult phase by focusing on high-quality, knowledge-driven services, the long-term result will be a manufacturing sector that is not only more profitable but also significantly cleaner. The "green cost" is real, but it is a price that can be paid, provided the destination is clear and the path is paved with the right kind of innovation.