Innovation, Competition and Firm Performance in the Service Sector.

Abstract

This thesis focuses on how innovation in firms can be developed and implemented under different conditions to produce long-term benefits for service firms using data from Ghana. Employing different methodological approach and analytical techniques, the thesis provides the following robust findings: first, customer demand, regulatory regime, competitive intensity, organizational culture and leadership determine service innovation propensity in service firms. Second, unlike previous studies that indicate that service innovation is directly related to a firm‘s performance, it is rather high levels of service innovations that maximize performance in service firms. Third, service innovation, as a strategy will yield maximum output when environmental conditions are aligned to the implementation. The thesis makes the following contributions to the literature: first, while other studies have been based on firm context, this thesis shows two broad internal firm factors and three key external factors that determine innovation in service firms. Second, this thesis asserts that it is rather high levels of service innovations that maximize financial and non-financial performance in service firms, and not the implementation of such innovations. Third, in order to produce sustainable competitive advantage for service firm, the results show that internal firm conditions such as innovative culture and leadership must be aligned with the innovation strategy to bring about complementarity of strategic assets. This thesis gives rise to important practical implications. First, managers in the service industry must build innovation orientation through its organizational culture and leadership as such alignment with innovation accrues complementarity advantages. Managers must be mindful of three key stakeholder groups i.e. customers, competitors and regulatory agencies as they largely give legitimacy to the innovation that a firm may create. Secondly, firms must develop and implement service innovations in combination and must be properly aligned with levels of customer demand and competitive intensity. Specifically, in the periods of high competitive intensity, firms must reduce their investments in the interactivity innovations in order to avoid reduction in financial performance.