Service Innovation and Management Innovation: The Role of Service Tangibility

Although we have some knowledge about how different types of innovation can be combined together to improve firm performance, there is little research about the relationships that innovation types may have among them. In this paper, we examine how service innovation is related to organizational innovation. We posit that service innovativeness can put demands on and increase dissatisfaction with existing management processes, structures and practices and stimulate organizational changes. That, however, will be dependent on the level of service tangibility. We study three forms of service innovation: technological, customer interaction, and conceptual. We develop hypotheses based on interaction and materiality theories and test these with a sample of both manufacturing and service firms. Our findings show that for some service innovation forms, service tangibility will moderate the relationship with management innovation so that it will increase the relationship, while will decrease it for other forms.