Management of Innovation in Services

TLDR

The article examines whether service firms innovate and how they organise innovation, arguing that the strategic innovation paradigm best explains service innovations and that organisational learning differs from innovation, which entails a jump in turnover and profit. The study develops a taxonomy of ways to organise innovation activities in service firms. The authors use case studies of Danish service firms to empirically analyze how they organise innovation activities. The analysis shows that service firms do innovate, but rarely have R&D departments and typically pursue innovation through unsystematic search‑and‑learn processes.

Abstract

The article discusses two issues. The first is whether service firms innovate at all; the second is how they organise the innovation activities. The basis for the analysis is a series of case studies in Danish service firms. The first issue is discussed theoretically. Of the several paradigms within traditional innovation theory, the strategic innovation paradigm is the most adequate to explain service innovations. Organisational learning must be separated from innovation whereby the latter means a jump in turnover and profit while the first means a lower and continuous growth. The emphirical analysis demonstrates that the service firms innovate. The second issue is analysed empirically. Different ways of organising the innovation activities are set placed a taxonomy. It is concluded that the service firms rarely have R&D departments and innovation generally is an unsystematic search-and-learn process.