Abstract
SMEs need to innovate in services in order to survive and to create value. Service SMEs are facing the challenge of offering their customers continuously improved or completely new services and hence require service innovations to achieve and sustain competitive advantage. We used service value creation capability to assess service innovation capability of SMEs. Service value creation capability is a holistic approach which consists of Strategic capability, Managerial capability, Organizational capability and Adaptive capability to transform an SME into a value creation SME. It offers an overview of service value creation capability and activities against which service SMEs can critically reflect their service innovation performance. Our research primary focus is to explore and to find the relationship of service value creation capability with service innovation capability and to assess the service innovation by using a proposed model for service value creation capability. The model is empirically validated in Danish and Turkish SMEs to identify the correlation between the service value creation and service innovation through an integrated service value creation capability model analysis. The empirical data analysis reveals that there is strong positive correlation between the SME's service innovation capability and service value creation capability (strategic capability, managerial capability, operational capability and adaptive capability).
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