The Rising Labour Costs and the Servitisation of Manufacturing Enterprises

An Empirical Investigation of Chinese Enterprises

Bibliographic Data

ID21543482
AuthorsXiang Gao (0000-0001-6812-8156, School of International Business Shanghai University of International Business and Economics Shanghai China), Huanlang He (0009-0003-8471-4544, School of International Business Shanghai University of International Business and Economics Shanghai China, corresponding author), Xixi He (0000-0003-2759-9669, School of International Business Shanghai University of International Business and Economics Shanghai China), Jingjing Wang (0000-0002-7962-606X, School of International Business Shanghai University of International Business and Economics Shanghai China)
Year2026
Volume49
Issue1
Pages135-157
Publication date2026-01-01
Open AccessYes
TypeARTICLE
VenueWorld Economy (JOURNAL)
Journal identifiersISSN: 0378-5920 • E-ISSN: 1467-9701
PublisherWiley (PUBLISHER • GB)
DOI10.1111/twec.70031
OpenAlexW4416904997
LanguageEN
References cited50

On the back of steadily rising labour costs, driving the servitisation of China's manufacturing industry holds significant importance. This study calculates highly refined indicators of enterprises' investment in servitisation and, in conjunction with data on minimum wages in counties and districts, examines how increasing labour costs affect enterprise investments in servitisation. The research reveals that the significant rise in labour costs notably boosts the level of enterprises' investment in servitisation. By decomposing the level of servitisation of enterprises' inputs into domestic and foreign parts, it is found that the increase in labour costs has mainly and significantly promoted the domestic level of servitisation of enterprises' inputs. This influence exhibits heterogeneity in terms of enterprise ownership, trade modes, regions, skilled labour, and factor intensity. From a mechanism perspective, the increase in labour costs primarily impacts enterprises' investment in servitisation by the endogenous development mechanism of enterprises and the collaborative mechanism of industrial chains among enterprises. Further studies indicate that the rise in labour costs drives various features in the transformation of enterprises' investment in servitisation, including substitution effects, strengthening effects of legal systems, and the impact of automation replacing human labour

Empirical research · Foreign direct investment · Manufacturing · Panel data · Open Source Software Innovations · Outsourcing and Supply Chain Management · Service and Product Innovation

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