Knowledge and innovation in service firms: A conceptual framework

This paper offers a critical review of relevant literature in the area of knowledge management and service innovation and suggests why previous strategy models fail to explain the relationship between knowledge resource and innovation in service firms and what the drivers of service innovation are. In service businesses, the service offering is often referred to as service packages or customer solutions, and relates to the process of customising product to meet customer-set specifications. Innovation and added values in service firms seems to have a closer relationship with the combination and recombination practices carried out by entities such as project teams particularly in matrix management firms. It is suggested that the firm s codified, rather than tacit, forms of knowledge particularly the firm-wide production systems can lead to various types of (re)combination. Based on the resource-based view of the firm, a study of production systems and resource recombination can provide better insights about the linkage between innovation, added value, and knowledge resource in the service industry