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DOI: 10.1016/j.ijpe.2015.11.004

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 Int. J. Production Economics 172 (2016) 54–64

Contents lists available at ScienceDirect

Int. J. Production Economics

journal homepage: www.elsevier.com/locate/ijpe

Service innovation and new product performance: The influence

of market-linking capabilities and market turbulence
Kaui-Hwang Chen a,1, Chun-Hsien Wang b,n, Shi-Zheng Huang c,d, George C. Shen e,2
a
Department of Tourism, Providence University, Taiwan, 200, Section 7, Taiwan Boulevard, Shalu Dist., Taichung 43301, Taiwan
b
Department of BioBusiness Management, National Chiayi University, Taiwan, No. 580, Sinmin Rd., Chiayi 60054, Taiwan
c
Institute of Management Sciences, School of Management, Lanzhou University, Science and Technology Building, 816. No. 1001 Stepon Rd., Futian District,
Shenzhen, China
d
Department of Business Management, National Sun Yat-sen University, 70 Lienhai Rd., Kaohsiung 80424, Taiwan
e
College of Management, National Chiayi University, Taiwan, Chiayi, Taiwan, ROC

art ic l e i nf o a b s t r a c t

Article history: Service innovation is a significant factor in maintaining a firm's competitive advantage in an increasingly
Received 12 November 2013 service-centered economy. Although there is a rich body of research on the role of service innovation in
Accepted 30 October 2015 value creation for firms, little attention has been paid to the effect of service innovation on new product
Available online 28 November 2015
development. This study advances the research on service innovation and market-fit capabilities by
Keywords: examining how a service-based firm's market-linking capabilities and market turbulence shape the
Market-linking capability relationship between service innovation and new product performance. The study offers a theoretical
Market turbulence framework that integrates both the resource-based and market orientation perspectives of service
New product performance innovation to investigate innovative service practices and activities that occur in contemporary service-
Servitization service innovation
based firms. Using an original dataset of 170 service-based firms from a service-centered economy, the
study demonstrates that the combination of high market-linking capabilities and high market turbulence
strengthens new product development performance. The empirical results further show that new pro-
duct performance is highest in situations involving high levels of service innovation, market-linking, and
market turbulence; thus, the findings support the proposed three-way interaction among these variables.
Overall, these findings contribute to a better understanding of the contexts in which service innovation
represents an invisible specific asset or resource for service-based firms.
& 2015 Elsevier B.V. All rights reserved.

1. Introduction significance of the service sector, the notion of SI is of central

Over the past two decades, the development of the global
economy has gradually shifted from the traditional production of
goods toward a service-centered economy. The service sector now
dominates the development of the global economy (Paton and
McLaughlin, 2008). In particular, more than 70% of the global
economy's gross domestic product (GDP) is derived from the service
sector, and innovation plays a crucial role in ensuring the creation of
economic activities (Ostrom et al., 2010). Global economic activity is
significantly dominated by the service sector because this sector
promotes the development of new services and enhancements
through service innovation (SI) efforts. Given the growing
n
Corresponding author. Tel.: þ886 5 2732 880; fax: þ886 5 2732 874.
E-mail addresses: khchen2@pu.edu.tw (K.-H. Chen), chwang@mail.ncyu.edu.tw,
chwang6113@gmail.com (C.-H. Wang), szhuang06@gmail.com (S.-Z. Huang),
ccshen@mail.ncyu.edu.tw (G.C. Shen).
1
Tel.: þ886 4 26328001x13509.
2
Tel.: þ886 5 2732910; fax: þ 886 5 2732932.
importance. SI is cited as the primary source of value creation
(Maglio and Spohrer, 2008; Möller et al., 2008; Zhang et al., 2015),
particularly in areas that involve creating value for customers via
innovation (Möller et al., 2008; Wang et al., 2015) and increasing
firm performance (Menor and Roth, 2008; Melton and Hartline,
2010). These studies provide insights into the origins of SI and offer
useful guidance for service management practice.
SI is becoming a crucial issue for research on service-based practice
for several reasons. First, the global economy is transitioning from a
traditional product-oriented economy to one that is service-based
(Chesbrough and Spohrer, 2006; Sheehan, 2006). The majority of the
economic growth in developing and developed countries is derived
from service products and activities that continuously contribute to
the global economy (OECD, 2006). Thus, SI has become an increasingly
important concern for service-based firms that focus on innovative
service initiatives and the adoption and implementation of the market
concept along their value-added chains. Nevertheless, traditional
innovation-measurement studies are greatly dependent on research
and development (R&D) expenditures. However, R&D considerations

http://dx.doi.org/10.1016/j.ijpe.2015.11.004
0925-5273/& 2015 Elsevier B.V. All rights reserved.
 K.-H. Chen et al. / Int. J. Production Economics 172 (2016) 54–64
may not be satisfactory for service-based sectors because the inno-
vation process also requires a number of non-R&D activities, such as
offering new services, servicizing human capital design and invest-
ment, training personnel, engaging in market research, and investing
in new production or service capacities.
Second, traditional manufacturing firms are beginning to inte-
grate or combine products and services as “bundled offerings” to
provide a complete value-added service chain and thus to increase
their competitive advantages. These bundled offerings are based
on the notion of combining products, processes, and services to
design and deliver new services and to create value for customers
and firms through services. Bundled offerings for service-based
firms have clearly resulted in greater interest in promoting new
service development and value creation to meet market needs.
Offerings based on SI require the integration of customers,
employees, suppliers, and partners in an innovative service pro-
cess that meets all of their needs (Carbonell, Rodríguez-Escudero,
and Pujari, 2009; Maglio and Spohrer, 2008; Melton and Hartline,
2010; Zhang et al., 2015). Particularly in a service economy, SI
activity is widely recognized as a key driver of economic growth
(IBM, 2012; Sakata et al., 2013; Tamura et al., 2005; Wölfl, 2005;
Chae, 2012). According to recent survey research by the Organi-
zation for Economic Cooperation and Development (OECD), the
service sector accounted for approximately 70% of aggregate pro-
duction and employment in 2005 (OECD, 2005; Tamura et al.,
2005). The World Trade Organization (WTO) reports that in 2011,
trade in the U.S. service sector was the world's highest ($185.6
billion), followed by trade in the United Kingdom ($103.3 billion).
China and Saudi Arabia are the world's largest markets for
imported services, which exceed exports in those countries by
$54.1 billion and $43.8 billion, respectively (WTO, 2012). As the
global economy has transitioned to a service-based economy, an
increasingly large stream of SI studies has emerged to attempt to
identify elements that are crucial to competitive advantages. From
this perspective, SI is an essential element that can facilitate a
firm's operations and thus contribute to its competitive advantage
(Avlonitis et al., 2001).
Third, given the emerging servicization era, many researchers
postulate that the development of more competitive service offerings
requires consideration of SI efforts in complex service environments
(Paswan et al., 2009). In addition to this already complex external
environment, service-based firms must continuously engage in inno-
vative services to manage new products or services. Naturally, a ser-
vice system is a dynamic configuration of people, technologies,
organizations, and information-sharing that creates and delivers value
to customer-focused providers and other actors (Dominguez-Pery
et al., 2013; Hallikas et al., 2014; IfM and IBM, 2008; Ng et al.,
2009). Clearly, SI is considered an important trigger for extensions of
the service business (Gebauer et al., 2008) because SI involves value
co-creation in which customers and firms are jointly involved in co-
creating value-in-use within a service system (Åkesson and Skålén,
2011; Chae, 2012; Hallikas et al., 2014; Ng et al., 2012; Payne et al.,
2008; Vargo et al., 2008). Understanding these value-creating activ-
ities and attributes enables a firm to manage its value proposition
around the value-in-use realized by its customers. This logic implies
that successful service firms must place greater emphasis on the
selection, development, and management of SI activities and attri-
butes that contribute directly to a customer focus (Bitner et al., 2008;
Sampson, 2012). Therefore, service-based firms are amenable to new
and better ways of providing services for the benefit of their custo-
mers. The goal of this study is to gain a better understanding of the
complex service system in an innovation-development process, which
results in the need to manage what innovative service logic entails for
service-based firms. Because of the emergence of service-based firms
and the servicizing of global markets, firms that engage in the creation
of innovative services may increase their performance. Thus, it is
55
necessary to identify the conditions under which particular relation-
ships enhance or constrain SI and new product development perfor-
mance by facilitating or inhibiting a firm's capability to explore SI
opportunities and their potential returns.
Despite previous studies’ recognition that SI is becom-
ing increasingly crucial for service-based firms’ competitive
advantages, research on the practice of SI remains limited (Chae,
2012; Hauser et al., 2006; Maglio and Spohrer, 2008; Essen, 2009;
Wooder and Baker, 2011) and is specifically linked to service-based
firms’ new product performance gains. Several key empirical
articles that relate to the effect of SI on a firm's performance are
summarized in Table 1.
In addition, there are no theory-based frameworks for SI in
service-based firms (Chase and Apte, 2007; Maglio and Spohrer,
2008) to assist us in understanding the consequences of SI.
Therefore, a more detailed exploration and understanding are
necessary for SI in service-based firms to meet the needs of theory
and practice (Essen, 2009; Paswan et al., 2009). Specifically, a
service-based firm's SI endeavors may facilitate the pursuit of new
market opportunities that may enhance its performance (Menor
and Roth, 2008); thus, adopting a strong SI practice is increasingly
considered necessary, albeit insufficient, for new product devel-
opment by service-based firms and has not been sufficiently
addressed by the current research.
For these reasons, this study attempts to address these gaps. It
examines the effects of two types of external market factors
(market-linking capability and market turbulence) on new product
performance gains. According to the resource-based view of firms
(Barney, 2001; Day, 1994), the success of a strategy depends on the
fit between resources and market orientation. Thus, the effects of
market orientation are likely to vary across different external
environmental conditions. Consequently, a better exploration of
the conditions under which SI implementation enhances a firm's
new product development performance may require a contingent
perspective that emphasizes the importance of fit in a firm's new
service development (NSD). This NSD should incorporate both
internal SI implementation capabilities and the external market-
oriented perspective to develop SI to meet market needs.
2. Service innovation as an intangible resource
SI can be regarded as a set of improvements in technology
innovation, business model innovation, social-organizational
innovation, and demand innovation with the objective of
improving existing services, creating new value propositions, or
creating new service systems (IfM and IBM, 2008). A firm's SI
capability is vital to its survival because innovative services drive
the transformation of new services, products, processes, and
technologies into outcomes that meet market needs. Obviously, SI
is concerned with service offerings and the processes of inter-
dependence between new service/product/process combinations
and customer/market needs by delving more deeply into the
additional value of changing firms’ operational models and their
perceptions of innovation, which may be relevant in both contexts.
Previous studies have generally suggested that innovative services
enable firms to access market trends (Carbonell, et al., 2009) and
enhance their learning capabilities (Den Hertog et al., 2010), thus
facilitating firm performance (Menor and Roth, 2008). SI can result
from novel combinations of existing services, people, technologies,
and approaches to satisfy both current and potential customers. In
fact, specific service activities can serve as invisible specific assets
(Penrose, 1959) that may generate competitive advantages. Based on
the seminal work of Penrose (1959), distinctive service activities may
constitute a specific capability that can be developed in different ways
to accelerate a firm's adaptation to environmental changes. This
56 K.-H. Chen et al. / Int. J. Production Economics 172 (2016) 54–64

Table 1
Survey of the available evidence of the effect of SI on firm performance.

Author(s) Data Research method Main findings

Chong and Zhou (2014) 256 healthcare organizations Partial least squares (PLS)  Collaborative and technological structures have a positive effect on a
firm's decision to adopt web-based demand chain management (DCM)
integration.
 Web-based DCM integration can improve SI performance.
Salunk et al. (2013) 192 Australian and 261 Amer- In-depth interviews;  The results suggest that service entrepreneurship (SE) and bricolage
ican project-oriented firms structural equation modeling indirectly relate to a sustained competitive advantage through SI.
(SEM)  SI plays a mediating role and positively affects sustained competitive
advantage.
O’Cass and Sok (2013) 250 Cambodian service firms PLS  Innovation capability has a positive effect on a firm's value offerings.
 A value offering has a positive relationship with a customer's perceived
value-in-use and thus enhances firm performance.
Kindström et al. (2013a, Eight product-oriented service Multiple case study;  Successful innovative service delivery is dependent on firms’ dynamic
2013b) firms interviews; capabilities.
secondary sources  Identifying the key microfoundations increases the service content of a
business portfolio.
McDermott and Prajogo 180 SME service organizations Multiple regression analysis  The exploration and exploitation of SI are positively associated with
(2012) in Australia business performance.
 The relationship between exploration/exploitation of SI and perfor-
mance is moderated by organizational size.
Cheng and Krumwiede Taiwan's top 500 service firms SEM  Market orientation has a positive effect on incremental/radical SI.
(2012)  Both incremental and radical SI has a significant influence on firm
performance.
Yen et al. (2012) 312 service firms Confirmatory factor analysis;  A focus on strategic orientation toward SI and an SI enabling mechan-
AMOS ism could be beneficial to SI readiness and thus have a positive effect on
SI performance.
Chen et al. (2010) 150 Taiwan IT firms PLS  Co-production has a positive effect on SI.
 A firm's innovation orientation can enhance the relationship between
co-production and SI.
Den Hertog et al. (2010) Service firms Literature review; theoretical  The study offers a conceptual framework for managing SI by proposing
framework development six dynamic SI capabilities.
 Six dynamic SI capabilities reflect a firm's efforts to achieve superior
performance.
Carbonell et al. (2009) 102 Spanish service firms PLS  Customer involvement has a positive, direct effect on innovation speed.
 Customer involvement has a positive, indirect effect on firms’
performance.
Paswan et al. (2009) Service firms Literature review; conceptual  An appropriate innovation strategy can lead to the development of new
framework of SI typology capabilities and thus enhance innovation success.
 SI typology is embedded in service-dominant logic and is anchored by
contextually relevant dimensions.
Menor and Roth (2008) 166 retail banks SEM  New service development (NSD) competence has a simultaneous,
positive effect on NSD competitiveness and effectiveness.
Avlonitis et al. (2001) 115 Greek financial companies Statistical evidence;  SI has a significant influence on firms’ performance through well-
ANOVA designed NSD.

capability is especially relevant in service-based firms in which tur-
bulent market and consumer changes require constant improvement
in implementing SI and increasing new product, process, or service
development, thus establishing new markets and commercial
opportunities.
It is important to recognize market orientation in SI deploy-
ment because it enables firms to identify and build the specific
capabilities needed to embed their products or services into their
service delivery processes. Day (1990; 1994) argued that firms
with a market orientation employ superior skills to understand
and satisfy customer needs. Moreover, Kohli and Jaworski (1990)
noted that a market orientation is crucial for firms to monitor
customer preferences and gather market information for the
development and provision of services. Accordingly, innovative
service offerings are characteristic of market orientation because
the nature of service involves direct and intense interactions with
customers. As demonstrated by Han et al. (1998), a market-
oriented innovation strategy can provide a more coherent and
comprehensive blueprint for firms to generate superior SI perfor-
mance. Firms that engage in market-oriented innovation strategies
can not only maintain existing customer satisfaction and loyalty
and attract new potential customers but also improve their market
share and even enhance firm performance. The empirical articles
that relate to market- and non-market-oriented strategies are
summarized in Table 2. As noted by Kohli and Jaworski (1990) and
Narver and Slater (1990), market orientation occurs through the
three distinct processes of intelligence generation, dissemination,
and responsiveness that in turn may enhance firm performance.
This study addresses those constructs by attempting to better
understand the relationship among market orientation, non-
market orientation, and SI. Thus, the intent of the current study
is to clarify the nature of these relationships and determine how
market orientation can serve as a valid strategy for enhancing
performance. Accordingly, we now consider some of the alter-
native perspectives through which this concern might be justified
and use those justifications to explore how our research focus may
be useful.
In this context, a central problem in SI is a strictly marketing-
oriented issue: this type of innovation can be understood as pertaining
to a service that is designed, delivered, and provided according to
market needs and trends that require increasing competence in
improved and innovative service offerings. Therefore, firms that
engage in innovative service efforts must simultaneously consider
market-oriented abilities, such as market-linking capabilities, in
response to external market requirements. In doing so, service-based
firms can deploy their service strategies and develop new operational
business concepts to provide firm-specific innovative services and in
turn increase their competitive advantages.
 K.-H. Chen et al. / Int. J. Production Economics 172 (2016) 54–64
Table 2
Market-/non-market-oriented strategies in SI.
SI generaon SI disseminaon
Market  Knowing how to engage in service activities
orientation  Interdepartmental collaboration and customer
observation to discover a customer's latent needs  “Outside-in” approach to the deployment of
and to generate new value-creating capabilities
 A high level of integration of market-related  The coordinated application of interfunc-
knowledge and skills into service value chain
offerings
 Long-term commitment to learning and acquiring  All organizational functions contribute to
market information in developing SI solutions
Non-market  Knowing when and how to engage in service  Economics of scale and standardization of 
orientation activities
 Using focus groups and customer surveys to explore  “Inside-out” approach to designing product/
customer wants and needs related to existing pro-
ducts/services
 Service designs and offerings are less integrated
 Short-term focus in responding to existing custo-
mers’ needs and desires
The President Chain store corporation (hereafter President) can
serve as an example of a company that is attempting to meet the
needs of customers and to improve its product commoditization.
President established a “market intelligence sector” to capture
external market information. The function of that sector is of
fundamental importance to understanding customer requirements
and developing market trends. In particular, it provides President
with a view of the market using existing sources of information to
understand what is happening in the marketplace, what the most
popular issues are, what competitors are doing, what customers
and consumers are doing, and what the likely market potential is
for new products or services based on previous activities and
responses. In addition, to respond to the challenge of market tur-
bulence, greater emphasis has recently been placed on innovative
services through a company's service value chain. For example,
Wang steak has clearly mastered continuous service process
improvement and a rapid-response ability to perform highly effi-
cient service processes using an integrated digital pantry system to
deliver excellent service for each customer. As such, Wang can
completely understand and effectively manage and contribute to
providing superior customer value. Specifically, Wang's excellent
service capabilities are embedded in a complex process of mana-
ging and selecting good sites and opening new branches smoothly.
Wang has developed distinctive service capabilities that provide
clarity to employees throughout the service value chain about how
to achieve customer responsiveness and value. Thus, Wang's dis-
tinctive service capabilities are that it is robust and it has shaped
its actions in new ways to speed the company's adaptations to
customer requirements and changes.
Drawing primarily on the resources-based view (RBV) of the
firm (Penrose, 1959; Barney, 2001), resources may consist of a
bundle of potential services such as functions or activities that
emphasize and contribute to the operations of a firm, including
products, technology, market expansion, and managerial techni-
ques. In this sense, SI can be viewed as an invisible asset that is a
crucial determinant of firm growth (Itami and Roehl, 1987). Fur-
thermore, the accumulation of these invisible resources and SI
capabilities requires ongoing, conscious, and time-consuming
efforts to link internal innovative and external market trends
that may create a way to capture new revenue streams and
increase profitability. For this reason, a service-based firm can
differentiate itself from its competitors through its invisible
57
SI responsiveness
 Service customization through supply net-  Focusing on creating customer value
work reconfiguration  Values evolve with system processes
cumulatively
all product- and service-related activities  Offering customers a convenient and inte-
grated solution
tional resources through the service  Active and flexible service offerings
value chain through the value chain to match envir-
onmental changes
customer value  SI offerings serve as sources of value co-
creation and competitive advantage
Focusing on existing customer satisfaction
routine service offerings  Service offerings are fragmented between
providers and customers
service activities  Offers customers partial solutions
 The creation of customer satisfaction mea-  Passive service offerings dispersed
sures is distributed among separate value throughout the value chain
chain functions
 All organizational functions concerning cus-
tomer satisfaction
Service H1(+) New product
innovation performance
H2(+) H3(+)
Market linking Market
capability turbulence
Fig. 1. Theoretical framework.
resources, such as SI capabilities and market-linking capabilities.
Thus, in this study, the theoretical framework is based on the RBV
(Barney, 2001; Day, 1994), which can reflect a firm's SI deploy-
ments and market-fit capabilities. An important implication of this
argument is that the resource and market-fit capability of a firm
can be explored with respect to internal SI deployment, external
market-fit abilities, and predictions of firm performance. This
study specifically develops the argument that although a service-
based firm creates new service efforts to satisfy customers’ varied
needs, such a firm must possess the ability to fully explore
dynamic environmental changes to obtain better market strategies
in the context of external market development trends. The con-
sequences implied by a firm's new product performance fostered
by invisible SI resources are consistent with a high level of market-
linking capability if the service-based firm possesses adequate
external environmental response capabilities and can engage in SI
in a highly turbulent market environment. Resource and market-
linking is appropriate as a framework for this study because of the
generally accepted notion that invisible SI assets and market-
linking capabilities affect firm growth.
In sum, SI implementation refers to a value co-creation con-
figuration of service providers, claims, customers, technologies,
internal SI, and external service systems to connect and share
information. The recognition of SI may lead firms to reconsider
their products, processes, service offerings, and external market
development to maintain their competitiveness from an SI strat-
egy perspective. Fig. 1 presents the conceptual framework of the
current study. This framework illustrates the importance of
simultaneously considering market-linking capabilities and mar-
ket turbulence as market orientations to identify the SI of service-
based firms, particularly in rapidly changing environments.
58 K.-H. Chen et al. / Int. J. Production Economics 172 (2016) 54–64
3. Hypothesis development
3.1. Service innovation and new product development
A growing body of research indicates that firms’ SI imple-
mentation may positively influence their performance (e.g., Menor
and Roth, 2008; Carbonell, et al., 2009; Melton and Hartline, 2010).
Service-based firms emphasize the use of new services and com-
binations of various resources, knowledge, and skills that repre-
sent an SI through which new service provision may create value
and increase performance. Because service-based firms are more
engaged in the provision of innovative services, firms in compe-
titive markets have more opportunities to create value for custo-
mers (Berry et al., 2006; Maglio and Spohrer, 2008) and conse-
quently to increase firm performance (Melton and Hartline, 2010).
As a consequence of their extensive SI activities, firms that
possess distinctive SI capabilities are likely to develop firm-specific
SIs that may positively affect their performance (Menor and Roth,
2008) and ensure a better fit with their SI strategies (Salunke et al.,
2013). According to Penrose (1959) and Barney (1991), a high level
of firm-specific innovative assets or capabilities, which often
involve tacit knowledge that may be difficult for competitors to
imitate and substitute, can assist firms in generating high levels of
performance. To reflect this consideration, a service-based firm
must identify and develop core competences by bundling the
skills, technologies, routines, actions, and operations that are
embedded in its service chain to gain competitive advantages
(Vargo and Lusch, 2004). Accordingly, service-based firms that
possess high levels of firm-specific innovative assets or capabilities
are more likely to accumulate innovative service-related knowl-
edge that positively affects their performance. From one perspec-
tive, a large number of firms operating in a highly changeable and
competitive market are likely to adopt innovative services to
capture and execute changes to maintain superior performance. As
illustrated by Yen et al. (2012), firms with large investments in SI
can easily respond to market competition and are therefore more
efficient in building and deploying distinctive resources than their
competitors; such an advantage enhances innovation perfor-
mance. Indeed, innovative service activities constitute a firm's
vehicle for delivering new products and services to customers,
employees, suppliers, and partners. External customers are
important sources of innovative service information that can assist
firms in identifying and evaluating market information and needs
from different sources and interactions, thus improving firm per-
formance (Menor and Roth, 2008; Salunke et al., 2013). Further-
more, those authors highlight the strong claims of service-based
firms that their SI activities in competitive markets enhance value
creation. This perspective is important because a competitive
market is one of the driving forces that often stimulates service-
based firms to develop and design new products/services and to
strive to introduce new technologies, methods, and initiatives in
creating customer value. In short, SI serves as critical catalyst to
enable new service development that can strengthen the level and
number of new services that a firm introduces in the marketplace
and can help build a sustainable competitive position.
Furthermore, firms that engage in SI can attract new customers,
discover potential customers, explore new market opportunities, and
thus increase new product development performance. Although firms
that fully explore SI may acknowledge their transition toward the
provision of competitive services, many firms continue to struggle to
determine how to optimally manage innovative service activities in
practice and consequently to contribute to new product development.
As service-based firms struggle to satisfy their customer requirements,
they may gain valuable insights into new product/service develop-
ment (Alam, 2002; Wang et al., 2005) and how to ensure its effec-
tiveness (Alam, 2002; Menor et al., 2002). Together, these notions
imply that firms with greater SI may enhance their ability to identify
and discover opportunities and thus strengthen their capacity for new
product development. Therefore, we predict that SI is likely to increase
new product development performance.
Hypothesis 1. A firm's service innovation is positively associated
with new product development performance.
3.2. The role of market-linking capabilities
Market-linking capability is defined as the extent to which
firms create and retain lasting relationships with customers and
suppliers and establish strong bonds with channel members
(Moorman and Slotegraaf, 1999; Song et al., 2007). Accordingly,
market-linking capabilities are based on external market knowl-
edge and the discovery and monitoring of trends in market
development, thus satisfying market and customer requirements
(Day, 1994). This capability can be used to support a firm in
actively seeking, absorbing, and scanning the external market
trends that develop in a competitive environment. Specifically,
firms that engage in innovative efforts cannot neglect the influ-
ence of external market factors such as customer requirements
and competitors’ strategies. Previous research suggests that
superior market-linking capabilities may provide new insight into
how a firm's products, processes, and service offerings meet cus-
tomer requirements and exploit marketplace opportunities
(DeSarbo et al., 2006; Song et al., 2007). Market-linking cap-
abilities enable firms to identify and predict marketplace
requirements before their rivals and to connect their other cap-
abilities to the external environment to form distinctive compe-
tencies and develop sustainable competitive advantages (Day,
1994; Hua and Wemmerlöv, 2006). Thus, market-linking cap-
abilities can produce superior market knowledge, which in turn
has been identified as a key resource linked to firms’ abilities to
respond to the market and ensure profit growth.
In a dynamic service economy environment, market acuity
becomes a critical factor in deploying SI efforts for two reasons.
First, SI processes are viewed as driven by increasingly complex
customer requirements and the need to define a capability-based
view of the competitive (Teece et al., 1997) advantages that enable
a firm to offer superior value compared with its competitors. The
capability-based view suggests that a firm can enhance its com-
petitive advantages using its distinctive market-oriented cap-
abilities (Day, 1994; Den Hertog et al., 2010). Clearly, a well-
developed capability, such as a market-linking capability, can
prove especially useful in dynamic operational environments in
terms of strategic flexibility and competitive weapons.
Second, firms’ focus on market-oriented SI enables them to
discover and link to the external market to discover customer
requirements and market trends (Jaworski and Kohli, 1993). Firms
that are more knowledgeable about market conditions are more
responsive to changing customer needs and thus are in a much
better position to reflect market trends. Therefore, a market acuity
capability provides a vehicle for learning from customers and
rivals to enable firms to gain a clear focus on the provision of
specific and superior customer value and thus to transfer and
apply their knowledge to commercial aims (new service/product
offerings) to create value through innovative activities. Accord-
ingly, a market-linking capability can be considered a crucial
capability that must account for firms’ engagement in SI not only
to allow such firms to respond to rapidly changing market trends
and customer needs but also to assist them in acquiring timely
information that can be directly utilized for new product/service
development. Thus, firms that possess strong market-linking
capabilities can be more sensitive in assimilating complex and
changing market information in the dynamic servitization market
 K.-H. Chen et al. / Int. J. Production Economics 172 (2016) 54–64
and can transform information and knowledge into internal SI
strengths. Therefore, the following hypothesis is offered.
Hypothesis 2. The relationship between service innovation and
new product development performance is stronger for service-
based firms with high market-linking capabilities than for service-
based firms with low market-linking capabilities.
3.3. The joint effects of market-linking capabilities and market
turbulence
Market-linking capabilities and market turbulence may jointly
influence the new product performance effect of a firm engaged in
SI offerings. Because market-linking capabilities and market tur-
bulence may coexist in firms’ operational environments (Tseng
and Lee, 2010; Day, 1994), these two factors are likely to have
interaction effects. Additionally, market turbulence arises in
service-oriented economies, especially in service-based settings in
which the dynamism and complexity of the consumer, competi-
tive, social, political, legal, and technological contexts encourage
continuous innovation in response to changes (Paswan et al.,
2009). Extending this insight to service-based sectors, studies have
shown that market-linking capabilities are particularly important
in turbulent markets for service-based firms with strong SI. These
capabilities facilitate a firm's acquisition of market-timing infor-
mation prior to its competitors’ acquisition of that information and
enable firms to rapidly respond to market requirements and cus-
tomer needs (DeSarbo et al., 2005; Song et al., 2008). Conse-
quently, service-based firms that possess well-developed market-
linking capabilities are likely to connect market trends to their SI
strategies to reduce the impact of uncertainty.
Market-linking capabilities are crucial for service-based firms
with strong SI because these capabilities may stimulate the dis-
covery of highly turbulent market requirements. Therefore, strong
SI constitutes an important source of new products/services to
support a variety of domains in successfully commercializing
innovative services. Service-based firms may also implement
sustainable innovations by applying their market-linking cap-
abilities to external market trends. Consistent with this view,
when faced with a high degree of market turbulence, firms require
greater creativity to engage in innovative activities and perform
well (Hult et al., 2004; Hurley and Hult, 1998). Indeed, in highly
turbulent markets, customers constantly change their product
preferences; thus, firms should be aware of these changes through
well-developed market-linking capabilities and should react by
engaging in innovative service activities to meet customer and
market needs. Thus, the combination of these perspectives sug-
gests that only certain conjunctive effects of SI orientation,
market-linking capabilities, and market turbulence maximize firm
performance.
Finally, we argue that to better understand the predictors of
new product performance, it is important to examine market
turbulence in conjunction with firms’ market-linking capabilities
to enhance innovative services and the business opportunities
afforded by their SI deployment. As noted above, in service-based
sectors within a highly turbulent market, a firm's SI lies in its
ability to rapidly respond to market changes with respect to cus-
tomers and competitors. That is, in a service-based setting, firms
encounter rapid, complex changes in their operational areas,
including uncertainty regarding customer needs, escalating com-
petitive pressures, and market growth uncertainty. To confront
this turbulence, firms tend to prefer continuous innovation;
because of increasing uncertainty, they must align their operand
and operant resources with market needs to ensure market suc-
cess (Paswan et al., 2009). Similarly, empirical studies have sug-
gested that a better understanding of product development and
59
ultimately new product performance effects can be obtained by
examining the market turbulence that shapes those effects (Song
and Montoya-Weiss, 2001; Bestieler, 2005). Accordingly, firms in
highly turbulent markets are more likely to engage in high levels
of SI to develop new products/services that satisfy their existing
customers, depending on the extent to which the interaction
between market-linking capabilities and SI can be expected. In
view of the above considerations, high levels of SI, market-linking
capabilities, and market turbulence represent the optimal combi-
nation of internal resources and external market factors to predict
firm performance. Thus, this study predicts that market turbulence
will simultaneously enhance SI and market-linking capabilities to
encourage new product development. These arguments suggest
the following hypothesis.
Hypothesis 3. At high levels of market-linking capabilities, the
relationship between service innovation and new product devel-
opment performance is stronger for service-based firms with high
market turbulence than for service-based firms with low market
turbulence.
4. Methodology
4.1. Data collection and sampling
The sampling framework for the current study consisted of
independent firms in servitization- and service-based sectors that
engage in SI activities. The sample frame was drawn from the over-
the-counter (OTC) firms listed in the Taiwan Stock Exchange Cor-
poration (TSEC) database, the Top 5000 (i.e., the largest firms in
Taiwan, published by the China Credit Information Service (CCIS)),
and the Annual Report on Industrial Production (MOEA, 2010). A
multiple database sample frame was used to eliminate firms with
missing data. Service-based firms were selected because of their
engagement in SI activities with respect to new products, services,
processes, and technologies and the activities of their value chains
in promoting competitive advantages and enhancing performance.
The study excluded firms that did not meet these requirements. A
stratified random sample of 850 service-based firms from various
service industries was obtained for the sample frame.
The data were primarily collected through a mail survey. The
main reason for the use of this collection method was that no
obvious proxies for the three focal constructs (i.e., SI, market-
linking capabilities, and market turbulence) were available from
secondary sources. To collect the research data, telephone contact
was made and a letter was mailed to senior executives at all 850
service-based firms requesting their participation. Of those 850
firms, 796 agreed to participate. A copy of the questionnaire, a
cover letter, and a return envelope were mailed to the participants.
The cover letter was used to explain the purpose of the study.
Three weeks after the initial mailing, a reminder letter and e-mail
were sent to those who had not responded. Another reminder
letter and e-mail were sent with questionnaires after the first
reminders. Ultimately, the survey generated 170 firms as a usable
and valid sample after 12 firms were excluded because of missing
data. The response rate was 21.4%. The responding firms operate in
the areas of software services, electronic equipment, consumer
products, business logistics, pharmaceuticals, retail banking,
mobile services, financial and insurance services, vehicles, and
information and communication. To deepen our understanding,
the supporting theoretical basis and the empirical results are
reflected in the structure of the methodology, as shown in Fig. 2.
Meanwhile, Fig. 3 shows the industry distribution of the sample
firms according to our available samples. The partitioning of the
pie chart highlights the heterogeneity of the sample, which is
60 K.-H. Chen et al. / Int. J. Production Economics 172 (2016) 54–64

Sampling Large-scale Empirical measured on multiple-item scales. The items were closed-ended
framework survey analysis and measured via Likert scales from 1 to 7 (1 ¼ strongly disagree
and 7¼ strongly agree).
Multiple Telephone Identify missing
databases for contact and letter data Furthermore, to reduce potential common method variance
determining to sample firms Factor analysis bias, the one-factor test proposed by Harman was used. We fol-
sampling frame First-wave Reliability and lowed the approach suggested by (Podsakoff and Organ (1986),
Identify survey validity analysis who suggest that if one-factor can explain the majority of the
service-based Reminder letter Identify
measured
variance, then common method variance may occur in the survey
firms and e-mail after
Stratified random three weeks constructs samples. A principal component factor analysis that included all of
sampling Second-wave Estimate the variables in the current study was conducted, and it resulted in
survey common method a three-factor solution. The first and largest factor only accounts
Construct SI variance bias
for 26.26% of the variance. Therefore, common method variance
database
does not appear to be a problem in the current study (Podsakoff
and Organ, 1986).
Fig. 2. Methodology and respective results.
4.2. Measures
Software services
4.2.1. Dependent variable
Electronic equipment
The dependent variable is new product development perfor-
Consumer products mance. A firm's new product development performance is mea-
sured using the percentage of the total sales accounted for by new
Business logistics products in 2012. The primary reason for the use of this measure is
Pharmaceuticals that new product sales indicate the realized market value of pro-
duct innovation efforts (Zhang and Li, 2010).
Retail banking

Mobile services 4.2.2. Independent variables

Financial and insurance
services
Vehicles
Information and
communication
Fig. 3. Industry distributions of the sample firms.
distributed across the ten industrial categories considered. A large
majority of the sample firms (117%, or 69%) are engaged in four
sectors: 45%, or 27%, in consumer products firms; 36, or 21%, in
retail banking firms; 21%, or 12%, in business logistics firms; and
15, or 9%, in financial and insurance services firms. These four
service-oriented sectors compose 69% of the selected sample.
All of the questionnaires were based on previous studies,
consultations with service industry experts, and the theoretical
foundation. Because the original Chinese questionnaires were
derived from the English theoretical literature, the questionnaires
could have produced linguistic misinterpretations. We utilized
back-translation procedures to ensure the validity of the research
questions and pre-tested the survey to ensure face and construct
validity. To avoid cultural and language bias, two bilingual Ph.D.
students with specialized research experience in technology
management were hired to participate in the translation and back-
translation between Chinese and English. The first Ph.D. student
was asked to translate the English questionnaires into Chinese,
and the second Ph.D. student was then asked to back-translate the
Chinese questionnaires into English to ensure item equivalence in
different languages. This procedure enabled the correction of
confusing or misunderstood language.
To assure the validity of the data analysis, the participants were
asked whether their firms had developed and launched at least
one new process, technology, or service during the past two years;
if they responded in the affirmative, we invited them to partici-
pate. In addition to the initial screening through telephone and e-
mail communications, all of the items in the questionnaire asked
the key informants to provide a self-report of the sales growth of
their new products under study. All of the constructs were
4.2.2.1. Service innovation. Service-based firms’ focus on SI activ-
ities was measured using two studies of validity. The original SI
research conducted by Avlonitis et al. (2001) indicated a focus on
the innovative service development activities of firms in the ser-
vice industry; the second study, conducted by Chen et al. (2010),
extended the research of Avlonitis et al. (2001) to reflect a focus on
SI in service-based firms. By integrating the definitions of SI pro-
vided by Chen et al. (2010) and Avlonitis et al. (2001), this study
argues that service-based firms that engage in product, process,
organizational, and marketing innovations, new technology
applications, service line extensions, and new delivery services
may be regarded as firms with SI. Following Avlonitis et al. (2001),
this study used five-item scales to measure SI (see Appendix A).
4.2.2.2. Market-linking capability. Based on previous research (Day,
1994; Song et al., 2007), market-linking capability was measured
using five items associated with market-sensing capabilities,
customer-linking capabilities, the ability to retain customers,
channel-bonding capabilities, and the ability to create durable
relationships with suppliers. The respondents were asked to
evaluate their market-linking capabilities.
4.2.2.3. Market turbulence. /Market turbulence was measured
using five items based on the work of Jaworski and Kohli (1993).
The items for the market turbulence scale measured the extent to
which the composition and preferences of a firm's customers tend
to change over time (Jaworski and Kohli, 1993).
4.2.2.4. Control variables. In this study, several variables were
controlled for when testing the hypotheses. First, this study con-
trolled for firm size using a log transformation of the number of
employees in each firm. Large firms have more abundant resources
to invest in innovation activities and thus are more likely to
achieve superior performance. Second, firm age was controlled by
calculating the numbers of years since the firms were founded.
Third, service quality was controlled because it is one of the most
important factors affecting new product development perfor-
mance. Previous studies have shown that high service quality may
assist in improving new product development (Atuahene‐Gima,
1995). Following Brady et al. (2002), ten items were used to
 K.-H. Chen et al. / Int. J. Production Economics 172 (2016) 54–64 61

measure service quality. Fourth, firms’ prior innovation experi-
ences may exhibit differences in skills and knowledge that could
contribute to certain advantages related to new product perfor-
mance. Fifth, market share was controlled, although it is often
difficult to measure; thus, the respondents were asked to report
their market share during the previous two years. This information
is important because the market share variable may affect new
product development. Finally, because the sample includes firms
from different industries, this study created firm-type dummy
variables to control for sector effects.
4.3. Estimation method
The dependent variable is the percentage of total new product
sales, which is a nonnegative variable and ranges from 0 to 100
(e.g., 0, 10, 20,...,100). A nonnegative dependent variable cannot be
employed in a traditional ordinary least squares (OLS) regression
because it is a count-based measure; furthermore, because the
predictor and outcome distributions violate normality assump-
tions, OLS may yield inefficient, inconsistent, and biased estimates
(Long, 1997). In addition, a count-based measure's distribution
violates the assumptions of regular Poisson regression because of
the overdispersion of values and the failure of its mean to
approximate the variance. A zero-inflated Poisson regression
model is adequate to overcome this overdispersion, and the out-
come distribution of the sampling units has zero counts (Lambert,
1992). The zero-inflated Poisson regression model is an appro-
priate approach that provides reliable estimates in consideration
of the effect of zero counts. Thus, this study used the zero-inflated
Poisson regression because it allows for the simultaneous esti-
mation of zero-count types of outcome distributions.
5. Analyzes and results
Table 3 displays the descriptive statistics, the correlation
matrix, and the main variables. In Table 3, market-linking cap-
ability and SI were highly positively correlated. Service quality and
SI were also positively correlated. Consistent with our expecta-
tions, the three main measures (i.e., SI, market-linking capability,
and market turbulence) were positively correlated with new
product performance.
Based on a hierarchical regression estimation strategy, Table 4
shows the empirical results. To estimate the potential threat of
collinearity, we estimated the variance inflation factors (VIFs) and
found that the highest VIF is not greater than 1.812, which is below
the recommended ceiling of 10 (Kleinbaum et al., 1998); thus, this
finding indicates that no potential multicollinearity exists in this
study. Model 1 includes only the control variables as an estimate of
the baseline mode.
Hypothesis 1 investigates the effect of a firm's SI on its new
product performance. The empirical estimation results in a sig-
nificant (p o0.001) and positive association (Model 2 of Table 4).
Therefore, the results indicate that firms with greater engage-
ment in SI increased their new product performance. Thus,
Hypothesis 1 is supported. Hypothesis 2 requires an examination
of whether the interaction of SI and market-linking capability has
a positive influence on new product performance. As shown in
Model 3 of Table 2, the coefficient for the interaction of SI and
market-linking capability is significant and positive (β ¼ 0.07;
po 0.05). Thus, Hypothesis 2 is supported. Hypothesis 3 predicts a
three-way interaction of SI, market-linking capability, and market
turbulence wherein new product performance is highest when all
three variables are high. The results in Model 3 of Table 4 show
that the coefficient for the three-way interaction is significant and
positive (β ¼ 0.005; p o0.1) and thus provide support for
Hypothesis 3.
6. Discussion
This study has adopted an extended RBV of the firm and
examined the new product performance consequences of a firm's
SI while considering its fit with market-linking capability and
market turbulence. The primary purpose of this study is to intro-
duce the concept of SI offerings to the research on new product
performance and to analyze how SI offerings interact with market-
linking capabilities and market turbulence. Specifically, this study
addresses an important but unsolved question regarding the
moderating effects of market-linking capability and market tur-
bulence on the relationship between SI and new product perfor-
mance. This study argues that the effect of SI on new product
performance is contingent upon market-linking capability and
market turbulence. This study contends that a firm's focus on SI
offerings in new product performance may provide new insights
into the conditions under which firms may increase their new
product development performance.
Numerous researchers have argued that SI offerings are crucial for
attaining competitive advantages and performance (Salunke et al.,
2013; Maglio and Spohrer, 2008; Essen, 2009; Wooder and Baker,
2011; Menor and Roth, 2008; Melton and Hartline, 2010). In a similar
vein, Avlonitis et al. (2001) argued that SI plays a fundamental role in
the development of new products/services because such innovations
constitute a primary means of promoting new product/service

Table 3
Correlation matrix (n¼ 170).

Variables Mean S.D. 1 2 3 4 5 6 7 8 9

1. Firm age 34.56 41.60

2. Firm size 363.25 350.23 .00
3. Industry types 6.37 3.32  .01 .04
4. Firm's prior experience 0.71 0.45 .04  .01  .08
5. Market share 0.14 0.06  .06 .01n  .22nn .16n
6. Service quality 5.43 0.75  .03  .01  .01 .08  .01
7. Service innovation 5.23 0.95  .11 .03  .07 .19n .25 .43nn
8. Market-linking capability 5.02 0.81  .11 .00  .01 .11 .07 .70nn .62nn
9. Market turbulence 5.00 0.75  .03 .01 .03  .06  .06 .18n .10 .16n
10. New product performance 0.082 0.063  .06 .12 .01  .14 .28nn .11 .20nn .20nn .29nn

Note:
n
po 0.1;
nn
p o0.05
62 K.-H. Chen et al. / Int. J. Production Economics 172 (2016) 54–64

Table 4 environments stimulate firms to invest in innovative services to

Results of the hierarchical zero-inflated Poisson regression on new product attract customers, thus greatly strengthening the positive effects of
performance.
SI on new product performance. Specifically, the inclusion of
Models Model 1 Model 2 Model 3 market-linking capabilities not only bridges the gap between SI
Hypotheses Controls H1 H2; H3s and new product development but also proves to be a crucial
capability affecting new product performance in the context of a
Intercept 0.942nnn 0.757nnn 3.358nnn (0.868)
dynamic and competitive servitization environment.
(0.272) (0.275)
Firm age  0.001  0.000  0.000 (0.000)
(0.001) (0.000)
Firm sizea 0.001 (0.021)  0.006 (0.020)  0.020 (0.021) 7. Research contribution and implications
Firm type 0.009 (0.008) 0.007 (0.008) 0.007 (0.008)
Prior innovation  0.323  0.366 (0.058)  0.335 (0.058)
experience (0.057) This study offers several contributions. First, it extends the
Market share 3.908nnn 3.300nnn 3.333nnn (0.496) previous research by reporting that new product performance is
(0.476) (0.491) contingent on both internal resources (such as SI offerings) and a
Service quality 0.151nnn 0.071n (0.042)  0.034 (0.053)
firm's own external market-fit capabilities. The findings provide a
(0.037)
Service innovation (SI) 0.149nnn  0.395nnn more detailed understanding of the moderating effects of
(0.035) (0.127) market-linking capabilities and market turbulence on new pro-
Market-linking cap-  0.411nn (0.150) duct performance. Second, this study is the first empirical effort
ability (ML)
to examine the roles played by market-linking capabilities and
Market turbulence (MT) 0.053 (0.106)
SI  ML 0.070nn (0.031) market turbulence in a firm's new product performance. This
SI  ML  MT 0.005n (0.003) study assists in providing a more complete picture of the aspects
Log likelihood  615.276  605.816  572.434 11 of service-based firms, including an understanding of how
Degree of freedom (df) 6 7 198.59
market-linking capabilities and market turbulence jointly affect
LRχ2(df) 112.91 131.83 0.000
Prob. 40.000 0.000 0.000 new product performance. Such capabilities are particularly cri-
tical because service-based firms generally lack external market
Note: connections in new and challenging service economy contexts.
a
Logarithms. N ¼170, Furthermore, this study also contributes to the growing service
n
po 0.1; science literature on SI. Third, this study takes a step forward in
nn
p o0.05;
nnn
p o0.001. The standard deviations are indicated in parentheses.
exploring the influence of internal resources and resource-
market relationships research to understand the new product
development to potential customers/suppliers, which is in turn related development performance of service-based firms by focusing on
to performance outcomes. Similarly, SI has been considered to play a SI, market-linking capabilities and market turbulence, which
catalytic role in attracting customer demand and creating new busi- have been largely neglected in the service science domains.
ness opportunities for new product development (Ostrom et al., 2010). Accordingly, no other study has attempted to assess the effect of
Based on these arguments, this study attempts to develop an firm-level SI on the new product development performance of
empirically based approach to new product performance for service- service-based firms; in particular, this study uses data from
based firms that may contribute to a fuller understanding of man- service-based firms in different industries to strengthen the
agerial decisions related to new product development. That is, the generalizability of the findings.
empirical results indicate that SI offerings and market-linking cap- This study also has important managerial implications. One
abilities can improve new product development and performance in a critical challenge that may be confronted in highly turbulent
highly turbulent market. A positive relationship between SI and new environments in service-based markets involves determining how
product performance appears to reflect that the implementation of SI to employ valuable innovative services to ensure success in service
will readily result in improvements in new product performance. In economy contexts. This study's findings suggest that service-based
particular, this study demonstrates a significant moderating role of firm managers in such turbulent environments must understand
market-linking capability and market turbulence in the influence of a that an SI offering is a viable means of attracting existing and
firm's SI offerings on new product performance. potential customers because service-based firms with strong SI
An expected result of the study involves support for an inde- capabilities are more likely to devote their resources to acquiring
pendent moderating effect of market-linking capability. One pri- and applying different technologies for new product development.
mary reason for this result is that the nature of market-linking More importantly, managers should realize that the effects of
capabilities may reflect a firm's ability to acquire market-timing market-linking capabilities enhance a firm's use of its existing
information, respond to market changes before rivals, develop and capabilities to increase new product performance. Because a
maintain relationships with partners and customers, and enhance service-based firm accumulates market information and knowl-
internal SI strengths to fit the external market environment edge, it is likely to become more efficient in developing, assim-
(DeSarbo et al., 2005; Song et al., 2008). Accordingly, firms with ilating, and applying market-timing information to product
high market-linking capabilities may enhance their SI because extensions. Furthermore, managers are also encouraged to devote
they possess the skills, abilities, and processes that are necessary more time and effort to establishing superior market-linking
to enhance innovative services that lead to the fulfillment of capabilities to facilitate new product success. That is, service-
rapidly changing market and customer requirements. That is, based firms must recognize the significant role of market-linking
market-linking capabilities are crucial to connecting internal capabilities in SI offerings, particularly regarding their important
resources such as SI offerings and external market environments. role in determining market-timing information and customer
Furthermore, as expected, highly dynamic and turbulent envir- demand requirements. Market-linking capability may serve as an
onments stimulate service-based firms to increase their engage- integration mechanism that provides internal resources and
ment in SI offerings and market-linking capabilities because such coordination with the external environment, and it increases the
 K.-H. Chen et al. / Int. J. Production Economics 172 (2016) 54–64
efficiency of market information acquisition when coupled with SI
in highly turbulent environments.
Despite its contributions to the service literature, this study has
certain limitations that may be addressed in future research. First,
because the concept of SI has hardly been explored in previous
studies, more conceptual and empirical research is clearly needed
to more deeply explore its role in the service science domain.
Second, the sample focuses only on the Taiwanese context. Future
research could explore other markets to understand the effects of
SI in different contexts. Thus, further research is necessary to
identify other market characteristics that may affect the impor-
tance of SI to new product development. Third, the performance
analyzed in this study covers only new product performance.
Future research directions may include exploring the broader
aspects of financial and organizational performance to obtain
more valuable implications.
In summary, this study is the first attempt to theoretically and
empirically examine the moderating effects of market-linking
capabilities and market turbulence on the positive effects of SI
on new product performance. Given the recent increased interest
in service science in the management domain, researchers must
provide a more comprehensive understanding of the effect of SI on
new product performance, along with its implications. Therefore,
this study may serve as an important step toward new research
directions and endeavors.
Appendix A
See Table A1.
Table A1
Measurement Scalesa.
Construct and Items
Service innovation orientation Cronbach's α ¼0.898; CR ¼0.928; AVE
¼ 0.723
In recent years,
1. our company has develop new services.
2. our company has improve and promote existing services.
3. our company has repackage and promote existing services.
4. our company has extend and promote existing service lines.
5. our company has introduce new services that competitors do not offer
in the market.
Marketing linking capability Cronbach's α¼ 0.839; CR ¼ 0.887; AVE
¼ 0.612
Our company has
1. market-sensing capabilities.
2. the ability to retain customers.
3. customer-linking (i.e., creating and managing durable customer rela-
tionships) capabilities.
4. the ability to create durable relationships with our suppliers.
5. channel-bonding capabilities (to create durable relationships with
channel members, such as wholesalers and retailers).
Market turbulence Cronbach's α ¼0.743; CR ¼ 0.840; AVE ¼0.509
1. In our type of business, the product preferences of and promoted
change significantly over time.
2. Our customers tend to constantly seek new products.
3. Our customers are often price-sensitive, but on other occasions, price is
relatively unimportant to them.
4. We are witnessing demand for our products and services from custo-
mers who have never purchased them before.
5. We cater to many of the same customers as in the past.
Notes: SFL ¼standardized factor loading. aItems are measured with seven-point
Likert scales (1 ¼ strongly disagree and 7¼strongly agree). CR, construct reliability;
AVE, average variance extracted. SFL ¼ standardized factor loading.
63
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