Service innovation : new service development with deep involvement of users and value networks

Service innovation has gained interest in recent years and new initiatives have been taken to integrate product innovation and service innovation research. One of the reasons service innovation has gained interest is that it includes not only innovation in service industries, but also service innovation as service encapsulation of goods and other services. Still, the literature on service innovation is fragmented and more knowledge is required to develop successful innovation policies and innovation management practices. This study investigates the relevance of customer involvement and value network partnerships in service innovation. Both topics are reviewed in separate literature studies reported in section 2. From these reviews, sets of testable propositions are developed. The propositions on customer involvement are further investigated by analyses of secondary data from the Community Innovation Survey (CIS-3) and primary data from an empirical study of customer involvement in the service innovation processes of selected service firms conducted in 2005. Propositions on value network partnerships are investigated by two case studies and by comprehensive analyses of the CIS-3 secondary data. The method applied in these studies is elaborated in section 3, including how new measurement instruments capturing these service innovation characteristics were developed. The investigations show that customer involvement has no universal effect on service innovation results. However, they also show that specific types of involvement have positive effects on service innovation results and that these effects are universal to all service firms. Thus, customer involvement may be used to improve service innovation processes and obtain positive innovation results, but the specific types of involvement must be carefully chosen to obtain the wanted innovation results. Similar results were found for value network partnerships, which had a positive effect on innovation intensity for both newto- the-market and new-to-the-firm innovations, while no general effects were identified on innovation processes. Supplier cooperation, however, showed a positive effect on innovation processes intensity. Thus, engaging in specific cooperative arrangements seems to have positive effects on innovation intensity and innovation processes, and further detail on these relationships are given in sections 4 and 5. This report contributes by the empirical findings reported above and by the other detailed findings reported in sections 4 and 5. In addition, the theoretically derived propositions presented in section 2 summarize much of the status of our knowledge of customer involvement and value network partnerships in service innovation. Furthermore, the measures developed to capture these elements may be applied in further studies of service innovation processes and types. The findings from this report have implications for innovation policy, service management and service research, suggesting that service innovation differs from product innovation and requires particular attention by innovation policy makers. The findings also guide service firm managers in deciding how to involve customers and engage in value network partnerships to obtain positive service innovation results and help service innovation researchers in their development of measurement instruments that better capture the unique characteristics of service innovation