Abstract
Innovation is one of the main factors affecting the firms' performance; however, it is less investigated in service firms. This study aims to assess the effect of service innovation on firms' performance in uncertain environments when the market orientation capabilities can help firms to operate more efficiently. Data was collected from travel agency managers in Iran. The results revealed that in stable environments, service innovation affects firm performance indirectly via quality of service and customer satisfaction. But having considered environmental uncertainties, service innovation showed a direct effect on firm performance in addition to indirect effects. Moreover, market sensing and customer linking capabilities are moderating the relationship between service innovation and firm performance in uncertain environments.
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