2.2 Influence of Service Innovation

2.2 Influence of Service Innovation on SMEs
Generally, innovation has been regarded as a
critical concern for numerous industries. For these
organizations, a higher innovative capacity
counterbalances their greater vulnerability in a
globalised business environment and a
knowledge-based economy. As SMEs continually
seize new opportunities to maintain a competitive
advantage, the capacity to develop new products and
to innovate ‘‘are in the very core of value creation’’
[22]. One study determined that, in a manufacturing
context, small firms are generally more innovative
but exhibit less extreme R&D and patenting activities
than do large firms [10].
Raymond and St-Pierre [22] clarified the
influence of process innovation on R&D as well as
the difference between process innovation and
product innovation; in an empirical study examining
205 Canadian manufacturing SMEs and accounting
for technological intensity, they confirmed that the
influence of R&D on product innovation was
mediated by process innovation. Raymond and
St-Pierre also determined that although product and
process innovation are often studied as completely
distinct processes and outcomes, in practice, these
two types of innovation are intertwined within the
innovation decision process and value chain of a firm
[10].
Mansury and Love [18] examined the impact of
innovation on the performance of U.S. business
service firms, focusing on the distinctions amongst
levels of innovation, the role of external innovation,
and the effects of external innovation on business
performance. The results indicated that the presence
and extent of service innovation exerts a consistently
positive effect on growth, but not on productivity.
External innovation exerted a substantially positive
effect on firm performance. Vrande et al. [28]
investigated 605 SMEs in the Netherlands to
determine whether open innovation practices were
applied by these firms, focusing on the motives and
perceived challenges that influence SME innovation
practices; they observed that SMEs engaged in
innovation practices and adopted an increasing
number of open innovation practices over several
years. In addition, SMEs that pursued innovation
primarily for market-related motives experienced
greater benefits from innovative behavior than did
SMEs who pursued innovation for other reasons, and
firm size positively influenced innovation behavior.
In addition, Vrande et al. [28] observed no significant
difference between SMEs belonging to manufacturing
sectors and those belonging to service industries. This
finding differs from that of den Hertog [8], who
stated that new service development is not the only
core of service innovation, meaning that service
innovation differs from tradition product innovation.
Consequently, determining whether SME-based
service innovation exhibits patterns similar to those
of traditional technology and product innovation and
whether designing corresponding service innovation
policies is necessary is crucial.
In summary, researchers believe that service
innovation substantially influences firm performance
and have proved that service innovation is the key
factor for the survival, growth, and development of
SMEs and businesses in the service industry; in
addition, SMEs in manufacturing sectors and large
firms in service sectors exhibit differing patterns of
service innovation [23].