Abstract
Innovation and the customer participation are central issues in research focusing on the performance of firms. However, the current literature offers little guidance on the extent of connection between firm innovation capabilities and customer participation and how they work together to enhance the quality of services and drive firm performance. Drawing on the literature focusing on firm capabilities and relationship management particularly customer participation, this study proposes that customer participation may account for the effects of service firm innovation capabilities (both technical and non-technical) on service quality. Empirical evidence from 259 firms supports this proposition. In addition, the study also finds that service quality positively enhances firm performance.
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