Service innovation and new product performance: The influence of market-linking capabilities and market turbulence

Service innovation is a significant factor in maintaining a firm׳s competitive advantage in an increasingly service-centered economy. Although there is a rich body of research on the role of service innovation in value creation for firms, little attention has been paid to the effect of service innovation on new product development. This study advances the research on service innovation and market-fit capabilities by examining how a service-based firm׳s market-linking capabilities and market turbulence shape the relationship between service innovation and new product performance. The study offers a theoretical framework that integrates both the resource-based and market orientation perspectives of service innovation to investigate innovative service practices and activities that occur in contemporary service-based firms. Using an original dataset of 170 service-based firms from a service-centered economy, the study demonstrates that the combination of high market-linking capabilities and high market turbulence strengthens new product development performance. The empirical results further show that new product performance is highest in situations involving high levels of service innovation, market-linking, and market turbulence; thus, the findings support the proposed three-way interaction among these variables. Overall, these findings contribute to a better understanding of the contexts in which service innovation represents an invisible specific asset or resource for service-based firms.