The role of service innovation in the market orientation—new service performance linkage

While most academics generally agree that innovation plays the mediating role between market orientation and new product/service performance, relatively little research has examined how each component of market orientation contributes to new service performance through various types of service innovation. Based on a survey of 235 managers and taking a component-wise approach, this study finds that customer orientation spurs incremental service innovation while inter-functional coordination spurs radical service innovation, both of which, in turn, enhance new service performance. A surprise finding shows that the impact of competitor orientation on new service performance is fully mediated by radical service innovation. The results of this study should help market oriented managers create and evaluate service innovation.