An empirical study on the relationship between service innovation and firm performance based on revised SPC model: evidence from China's communication industry

Abstract

This study empirically investigates the impact of service innovation on performance. By introducing innovation efforts into SPC framework, we construct an integrative model linking service innovation, process performance and firm performance together. Hypotheses are tested based on the survey data obtained in communication sectors in China. Several findings are found. Firstly, internal and external service innovation efforts are positively associated with process performance (employee and customer satisfaction) and firm performance, indicating that the involvement of innovation extended the scope of SPC framework. Secondly, there are four paths through which innovation efforts impact firm performances directly and indirectly, and the impact intensity of internal innovation on firm performance is weaker than that of external innovation. This shows that internal innovation efforts have not been the priority in service firms in current stage. Thirdly, cost-saving innovation and new service development are two types of innovation modes in current China’s communication service firms.