Service Innovation - An Empirical Study on the Impact of Different Service Innovation Processes and Methods to Entrepreneurial Success

Abstract

International rankings show that Switzerland is regularly rated one of the most innovative economies in the world. On the other hand, Switzerland still lacks in innovation in the service sector. This is even more significant, considering that the companies situated in the services sector, represents the largest segment of the Swiss economy.

Different types of service innovation processes are identified: R&D-based, practice-oriented and ad-hoc processes. Considering the methods used in these processes, they may have a stronger focus on service and/or innovation and maybe used with variable frequency. A survey about 300 Swiss companies indicates, that innovative firms from this service sector often use “service-specific innovation processes” and apply this methods more frequently than others. This can increase the market share of innovative service firms and strengthen their competitive position.   Objectives: The following paper discusses in particular the service innovations and investigates the influence of different innovation process types and methods on the number of new and improved services on the one hand, and how to improve the entrepreneurial success measured with sales and profit shares as well as the competitive position on the other.

Prior Work: To design a research model as a framework for the questionnaire, an abstraction of the innovation spinner was developed. In the model three types of innovation processes as independent variables where interrogated: the R&D based, the ad-hoc and the practice-driven processes. With regard to the innovation methods four different types of methods where referred to in the survey (also independent variables): general management methods without any focus on services, service specific methods, and innovation specific methods with and without focus on services. Innovation output (new and improved services) and entrepreneurial success (profit share, sales share and competitive position) where used as dependent variables.

Approach: From a randomized proportional stratified sample with 6000 Swiss service firms results a data record with 300 fully filled questionnaires. Regression analysis is used to test the significance of the whole model and analysis of variance is used to find significant differences between three different types of companies: not innovative companies, innovative companies and very innovative companies.

Results: The regression analysis shows that with regard to the profit share as dependent variables the model is significantly affected by improved services. In contrast, the competition position is influenced by new and improved services. Furthermore, the use of R&D based innovation processes leads to a bigger number of new and improved services.

The t-tests present the following significant results:

- The bigger the company is, the more new and improved services where offered;

- Profit and sales share of new and improved services is independent of the company size;

- Innovative companies more often use an innovation process;

- Innovative companies use more innovation methods;

- Very innovative companies more often use innovation specific methods.

Implications: The Fraunhofer Institute show in their research that the maturity level of methods used is below 26%. Hence, the development of service and innovation specific methods is a key task for any company and research institutions dealing with service innovation. Knowledge and technology transfer institutions should support SMEs by implementing and formalizing these processes and methods. At last, universities should provide courses or even degree programs with a main focus on service innovation management.

Value: It was shown that innovative service companies use service-specific innovation processes and methods more frequently, which can increase the profit share of innovative services and improve their competitive position.

Keywords: service innovation, processes, methods, entrepreneurial success

JEL Classification: M10, O31