FIRM INNOVATIVENESS IN SERVICE INDUSTRIES: A CONSTRUCT VALIDATION IN THE EXTERNAL ENVIRONMENT AND INDUSTRY STRUCTURE CONTEXTS

Abstract

This paper contributes to the limited research on innovation in service industries. We develop an advanced, more comprehensively and universally applicable measure of firm innovativeness that captures an organisation’s overall potential to innovate. We provide a first empirical validation in the context of a heterogeneous service industry, the German real estate industry, and investigate the relationship between firm innovativeness and actual (product and process) innovations, while taking the external environment and the industry structure into consideration. The PLS–SEM results of our study of 241 individuals from 76 organisations confirm the newly developed measure’s validity and provide further evidence of the industry’s current state: Firm innovativeness influences the perceived firm performance only through product innovations, i.e., new goods and services. Furthermore, external heterogeneity moderates the relationship between firm innovativeness and product innovation positively, while high levels of regulation, contrary to our expectation, encourage both innovation types directly.