Service Chains’ Operational Strategies: Standardization or Customization? Evidence from the Nursing Home Industry

Abstract

Problem Definition: We explore how the Degree of Standardization (DoS) across units within service chains affects their performance outcomes, focusing on the nursing home industry. Specifically, we analyze DoS across three operational dimensions: customer mix, service offering, and service delivery, and its impact on three key nursing home outcomes: financial performance, clinical outcomes, and resident welfare.

Academic/Practical Relevance: All service chains face decisions regarding the level of uniqueness versus standardization of their units, yet the impact of these decisions on performance outcomes remains unclear. This study assesses standardization strategies across multiple operational dimensions within nursing home chains and extrapolates findings to other service industries.

Methodology: We utilize a panel dataset spanning eleven years (2005–2015) that comprehensively measures all nursing homes in the U.S. The analysis estimates relationships between DoS and nursing home outcomes using fixed-effect models with instrumental variables and clustered standard errors.

Results: Our findings suggest that nursing home chains should: 1. Customize service delivery and standardize customer mix across units to enhance financial performance. 2. Standardize customer mix to improve clinical outcomes. 3. Customize service delivery to improve resident welfare.

Managerial Implications: This study represents the first systematic, multi-dimensional assessment of standardization strategies in multi-unit service firms from a chain perspective. The results offer guidance to nursing home chains on strategies for within-chain standardization and investment decisions in property acquisitions. Additionally, they provide broader managerial insights into standardization strategies for service chains and their merger and acquisition activities.