The Effect of Frontline Employee Co-creation on Service Innovation: Comparison of Manufacturing and Service Industries

The involvement of frontline employees is critical to successful service innovation. Frontline employees often know what their customers need as well as what types of services their firms offer. Service deliver is highly dependent on the actions of frontline employees, who are the focus of the current research. However, the understanding on the influences of co-creation with frontline employees on service innovation performance is insufficient. Therefore, the research model based on service-dominant logic and empowerment perspective was developed to investigate the effect of co-creation with frontline employees on the performance of service innovation. The results drawn from a survey of 149 IT firms and 103 finance firms suggest the followings. First, the frontline employee co-creation by two-way communication can facilitate frontline employees’ sentiment (i.e., motivation, commitment and satisfaction) for the implementation of new services in both the IT and financial industries. Second, for the IT industry, the frontline employees’ sentiment positively affects the financial performance and non-financial performance, except for the links of motivation–financial performance and commitment–non-financial performance. For the financial industry, the frontline employees’ sentiment positively affects the financial performance and non-financial performance, except for the commitment–financial performance. Third, the effects of satisfaction on financial and non-financial performance are stronger in the IT industry than the financial industry. The links of motivation–financial performance and commitment–non-financial performance are stronger in the financial industry than the IT industry. Finally, we offer some managerial and research implications for service innovation and frontline employee co-creation.