Modeling the impact of service innovation for small and medium enterprises: A system dynamics approach

Small and medium-sized enterprises have played an important role in Taiwan's economic development. As the importance of service grows, SMEs could undergo transformation via service innovation. SMEs are likely to encounter within the context of globalization and tried to identify the key factors influencing service innovation. Resource-based theory was used to construct system dynamics models for the SMEs prior to and after service innovation in order to develop a set of evaluation mechanisms. Simulation results showed that SMEs face operational difficulties due to globalization. Thus, SMEs should invest appropriate resources to develop market adaptability, knowledge application capability, collaboration abilities, and the effective application of information technology. This will enhance the overall service innovation capability of the business, which could then establish a new service value and increase market competitiveness.