The Role of Co-creational Strategies in Stimulating Service Innovation. Dr. Rajeev Verma

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1 Page 1 of 20 ANZAM Strategic Management Competitive Paper The Role of Co-creational Strategies in Stimulating Service Innovation Dr. Rajeev Verma Assistant Professor, Chandragupt Institute of Management Patna, Bihar, India - rajeev.verma@cimp.ac.in, rajeevsuccess@gmail.com Dr. Jyoti Verma Assistant Professor, Chandragupt Institute of Management Patna, Bihar, India - jyoti.gurukul@gmail.com,

2 ANZAM 2014 Page 2 of 20 The Role of Co-creational Strategies in Stimulating Service Innovation Abstract Paper investigates service innovation architecture and its role in the firm performance. The study put forward a strategic framework for sustainable competitive advantage of the firm and proposes a model for service innovation based on effective resource allocation. Using survey data of 112 Software ventures based in Mexico, we found that market capability in terms of cocreational efforts, organizational orientation (market and innovation) and IT infrastructure are the pre-requisites for service innovation. Moreover, customer orientation strengthens the innovation process. Overall this paper aims to contribute to the strategic planning of service firms by guiding resource allocation to ensure sustainable growth. Key words: resource advantage theory, service dominant logic framework, service innovation architecture, marketing strategy, sustainable competitive advantage

3 Page 3 of 20 ANZAM 2014 The Role of Co-creational Strategies in Stimulating Service Innovation Introduction Globalization and increasing competitiveness in the services industry have driven the service firms to thrust innovativeness in marketing operations to gain sustainable competitive advantage in the marketplace. Service innovation involves innovating intangible products for a more radical service-logic perspective that challenges the conventional attribute-based view of services delivery designs (Hunt, 2000a, 2000b, 2002; Blazevic and Lievens, 2008). Innovative business partnering, co-creation, effective resource utilization efforts have improved shareholder value, capability for service innovation and in-turn firm performance (Vargo and Lusch, 2004, 2006, 2008; Madhavaram and Hunt, 2008). This has led the firms towards delivering high-value services at competitive prices to their target clients (Sheth, 2011). Literature suggests resource advantage theory of competition (Hunt, 2000b) and service-dominant logic (Vargo and Lusch, 2004) as two fundamental approaches to discuss the service innovation at firm level. Applying these frameworks, various models have been proposed to measure the firm performance and effectiveness of service innovation. In the continuation, the basic objective of this present study is to put forward a service innovation framework to explore the phenomenon and investigate the role of various actors in market competitiveness. Further, study also tries to explore the moderating role of customer orientation in applying innovation architecture. In this paper, we propose a conceptual framework that enables different actors in service innovation architecture to interact and develop capability for value creation for its consumers. This paper addresses how firms can effectively harmonize various drivers of innovativeness with firm sustainability. Overall, this article aims to contribute to the strategic planning of the firms in service sector by guiding their resource allocation to ensure sustainable growth. In the following sections the theoretical background, 1

4 ANZAM 2014 Page 4 of 20 conceptual framework, methodology and results have been discussed along with the managerial implications and avenues for the future research followed by conclusion. Taxonomy of Service Innovation and Reviewed Literature In our specific research context, a common trait in the service innovation model evolution is the strong focus on the development of a taxonomy that can capture the dynamics of service firms. It is established that, existing notions of innovation in the manufacturing sector cannot simply be transposed to the service sector (Hipp and Grupp, 2005). Hence, various authors have proposed taxonomies of service innovation deriving core concepts from manufacturing, with a view to obtaining a better understanding of innovation in services. The chronological evolution of service innovation taxonomy has been summarized as in the table 1. It shows that the technique of service innovation measurement has been gradually evolved from conceptualization of innovation concept by Schumpeter (1939) and emerged as to a structural methodological model approach by Liu and Chen (2007). Table 1: \\ about here \\ However, the recent research on service innovation has been dichotomized based on theoretical underpinning of resource advantage theory of competition (R-A) by Hunt (1995) and service dominant logic (SDL) framework by Vargo and Lusch (2004). The dynamic interdisciplinary resource advantage theory maintains that the key growth results from innovations that stem from the process of competition. Using the R-A theory the relation between firm output and inherent resources can be explained as, output = f {(Σ tangible resources), (Σ intangible resources)}. On the contrary, the service dominant logic by Vargo and Lusch (2004) advocates consumer as resource integrator. It argues that a firm production 2

5 Page 5 of 20 ANZAM 2014 output is best explained by customer resource integrating and value producing activities rather than merely its resources (Vargo, 2008) and explains firm output as, output = f (Σ resource integrating and value producing activities). A range of service innovation models have been advanced in the literature either based on resource advantage or via service dominant framework. Examples of some of these recent contributions are outlined in the table 2 as, Table 2: // about here // Out of the two heavily used frameworks, resource advantage theory forms the basis for the firms looking into performance parameters based on their resource base (Bharadwaj, Clark and Kulviwat, 2005). Similarly service dominant logic becomes the basis for more recent papers into the area of service innovation (Ordanini and Parasuraman, 2011). Conceptual Framework and Proposed Research Hypothesis Based on the Resource Advantage (R-A) theory and Service Dominant logic (S-D-L) framework, the architecture of service innovation converge towards three aspects, namely, collaborative efforts (customer, business partner and knowledge integration mechanism), information technology infrastructure and organizational orientation (market and innovation orientation). Further, these building blocks of firm innovation architecture comes under three resource levels namely; basic, composite and interrelated operant resources (Hunt 2000b). The basic assumption of this architecture is that all the actors play important role in market decision process. Accordingly, innovations in services may be regarded as novel mechanisms of delivery that improve a firm s competitive position and offer great customer 3

6 ANZAM 2014 Page 6 of 20 convenience (Lovelock and Wright 2002). By linking up constructs under the two distinct service innovation framework (R-A theory and S-D logic) with the drivers of innovation architecture, we propose a contingency framework as in the figure 1. Figure 1: // about here // We studied service co-creation at three levels, i.e. business partner collaboration, customer collaboration and knowledge integration with in the firm level employees. Further, service logic defines the capability to bring customers (and other external stakeholders such as business partners) in directing the firm market orientation and use them as mechanisms to foster change into the firm collaborative competence (Lusch, Vargo, and O Brien 2007). The impact of service innovation and improved delivery systems have been studied in multiple cases along with the firm s financial performance (Lievans and Moenaert, 1994, Agarwal and Selen, 2014, 2011 and 2009). Storey and Kahn (2010) studied the effect of service performance on sustainable competitive advantage of the firm. Sustainable competitive advantage (SCA) is conceived as that range of outcomes from the firm s innovation activities that enables the firm to achieve superior market advantages and resist erosion by competitors (Bharadwaj, Varadarajan, and Fahy 1993). Prahalad and Ramaswamy (1990) suggest that firms combine their resources and skills into core competencies, loosely defined as that which a firm does distinctively well in relation to competitors. In the present study the research framework establish the linkage between service co-creation and getting sustainable competitive advantage. It can also be summarized as in the figure 2. Figure 2: // about here // The research hypotheses have been framed on the basis of the variables studied under the proposed framework for the service co-creation. The firm level co-creational activities have been studied converging towards three aspects, namely, collaborative efforts (customer, business partner and 4

7 Page 7 of 20 ANZAM 2014 knowledge integration mechanism), information technology infrastructure and organizational orientation (market and innovation orientation). These variables have been further explained in the framed hypothesis as, Hypothesis 1: More the firms implement service co-creation in terms of collaborative efforts (customer, business partner and knowledge integration) in the innovation process, higher is the extent of service innovation and hence sustainable competitive advantage of the firm. Hypothesis 2: The greater the information technology infrastructure of the firm, higher is the extent of service innovation and hence sustainable competitive advantage of the firm. Hypothesis 3: the greater the firm organizational orientation (market and innovation), higher is the extent of service innovation and hence the sustainable competitive advantage of the firm. Hypothesis 4: the customer orientation of the firm moderates the service innovation of the firm its performance measured in terms of sustainable competitive advantage. Research Methodology Research Setting and Sampling Plan The study context is the Mexican IT industry in particular software firms working in the business centric environment. IT sector has been chosen because of service complexity, market competition and rate of service innovation apart from being of national economic importance (Verma, Plaschka, and Louviere, 2002). Though the choice of a single sector may limit generalizability, it also reduces sampling error raised due to heterogeneous industries (Han, Namwoon, and Srivastava, 1998). Data on the independent variables (drivers of innovation) has been collected through a 7 point Likert Response Format (LRF) scale from 112 project and team leaders. We approached senior management and associates for collecting data on performance parameters. Pre-tested questionnaires were initially drafted in English and later translated 5

8 ANZAM 2014 Page 8 of 20 in Spanish for use in Mexico. The translations of questionnaires both ways (framing questions and responses) were carried out by the professional translators (Churchill Jr., 1979). Operationalization and Measures All constructs in the study has been measured using multiple items. A seven point Likert Response Format (LRF) scale has been used to capture the variables and indicator items. The scale has been adopted from previous studies and consists of total 57 items to operationalize 9 construct level variables. We measured collaborative efforts (business and customer) by adapting 8-item scale developed by Gruner and Homburg (2000). To assess the presence of knowledge integration mechanisms, a 5-item scale measuring the extent to which a set of formal processes are used to capture, interpret, and integrate knowledge in the service innovation process has been developed by De Luca and Atuahene-Gima (2007). To measure market orientation a multi-item construct has been developed by Narver and Slater (1990). Being consistent with the earlier studies (Hurley and Hult 1998) we consider innovation orientation as a determinant of organizational innovation. A 5-item scale has been used to measure the extent of IT infrastructure. Service innovation and sustainable competitive advantage (Bharadwaj, Varadarajan, and Fahy 1993) has been measured using 7 point scale each. The reported reliability (cronbach α) values for these scales areas in the table 3. Before analyzing, the data has been tested against normality. Apart from measuring skewness and kurtosis, the data has been gone through multivariate normality check using Kolmogorov-Smirnov test of normality (Lilliefors Significance Correction). Table 4 and 5 discuss about descriptive statistics and variable correlations. Table 3: //about here// Table 4 and 5: //about here// Analysis Plan 6

9 Page 9 of 20 ANZAM 2014 In developing our research instrument we followed the procedures for conducting research as proposed by Hair, Anderson, Tatham and Black (2006). The constructs has also been tested for any possible systematic errors, like common method bias (Podsakoff, MacKenzie, and Podsakoff, 2007). The scale item was examined for potential common method variance [CMV] using Harman s one-factor test. The exploratory factor analysis [EFA] derive 5 factors total explaining percent of the variance. If one general factor were derived, it would explain only percent of the variance. Analysis shows that the single-factor solution did not fit the data well with model fit statistics [χ2/df=18.79, NFI=0.73, TLI=0.46, CFI=0.48]. Together these two tests indicate no evidence of common method bias in the study hence found suitable to proceed further. Model description, Results and Discussion The hypothesized relationship as depicted in figure 1 is tested using the 3 step linear step-wise regression technique. In includes testing of direct relationship between independent and dependent variables apart from testing for the mediating and moderating roles of service innovation and customer orientation respectively. Hypotheses are tested using following system of equation as, Hypothesis 1: FLSI = α 1 + β 11 SCC + β 12 SBPC + β 13 SKIM + e 1 (1) Hypothesis 2: FLSI = α 2 + β 21 SCMO + β 21 SCIO + e 2 (2) Hypothesis 3: FLSI = α 3 + β 31 ITI + e 3 (3) FSCA = α 4 + β 41 FLSI + e 4 (3a) Hypothesis 4: FSCA = α 5 + β 51 {SCCO x (SCOO, ITI, SCO) + β 72 FLSI + e 7 (4a) 7

10 ANZAM 2014 Page 10 of 20 Where, SCC stands for customer collaboration, SBPC = business partner collaboration, SKIM = knowledge integration mechanism, SCO = collaborative efforts, SCMO stands for, Market orientation, SCIO stands for, Innovation orientation, SCOO = organizational orientation, ITI stands for information technology infrastructure, SCCO = customer collaboration, FLSI = firm level service innovation and FSCA = firm level sustainable competitive advantage. The results are summarized as in the table 6, The test results of hypothesis 1 shows the relationship between collaborative efforts and service innovation of the firm using bi-variate regression analysis. The relation has been found significant (β=0.647, p<0.001). Further, it has been tested across the sub-dimensions of customer collaboration, business partner collaboration and knowledge integration. Result shows that all three dimensions have a positive and significant relationship with service innovation. Similarly, the test results of hypothesis 2 and 3 shows the relationship between organizational orientation and information technology infrastructure of the firm using step-wise regression analysis. The relation has been found significant at (β=0.451, p<0.001) and (β=0.782, p<0.001) respectively. Testing of moderating role of customer orientation in hypothesis 4 requires the creation of interaction variable by multiplying customer orientation with co-creation efforts. Prior to multiplication the test for multi-collinearity has been done. The VIF is found well under the described limit implicating no effect of multi-collinearity. In order to test the hypothesis, moderated regression analysis is performed for each of the variable. Results shows significant moderating role of customer orientation on the co-creation customer orientation relationship (β= 0.621, t=3.417, p=0.605). The results obtained has been shown in the table 7 as, 8

11 Page 11 of 20 ANZAM 2014 Results have shown that, service innovation mediates the direct and positive effect of co-creation, IT infrastructure and organization orientation on firm performance and it helps in significantly putting up the effect of service co-creation on firm performance. However, we require more empirical findings to generalize the results across industries. The findings are consistent with the earlier studies done by Ordanini and Parasuraman (2011). Overall, this study establishes that market orientation is a theoretically a relevant construct for understanding the service co-creation efforts. Above results provides useful insights regarding the management of service co-creation efforts in generating firm performance. Theoretical and Managerial Implication The proposed measurement model is an estimate to find out the right fit between service innovation complexity and its role in achieving the sustainable competitive advantage of the firm. However, the model complexity may vary across service sectors as well as in different business units within the same industry based on the resource availability and firm maturity. Further, the condition may vary across B2B and B2C context. Hence, from the managerial perspective it is imperative to understand the applicability of different business model in existing business context. For this the first step while adapting suitable innovation model is to diagnose the business environment along with the customer complexity and resource availability. The diagnosis can be performed by surveying the organization. Further, if firms are available of the resources it can go for implementation of the suggested models and hence mitigate then biases occurred during the usage of wrong estimation models. It can only be possible if the right parallel can be drawn between then using the environmental diagnosis. However the crucial final step is the implementation of the proposed model. Two important barriers in its implementation may be the manager motivation and customer feedback. Up to some extent, this can be managed by converging the direction of integrated service innovation architecture with the firm mission and vision statement. However, the operational efficiently of the firm is an important parameter for consideration. 9

12 ANZAM 2014 Page 12 of 20 Future Research Directions The research on service innovation has suggested a strong linkage between the theoretical and practical implementation of the model. To conclude it is important to share the operational view of service innovation estimates and to gather the manager s perspective to the existing model. The research directions and their operational perspectives have been discussed as in the areas of, Service co-creation: interesting to explore how customer identifies the core competency of the firm to select their offering. Nature of value creation: interesting for mangers to know the resource allocation for enacting the values creation process at various steps of the innovation model. Market sensing, knowledge sharing and organizational learning: important to understand how firm are capable of sensing the marker requirements. Governance and public policy issues: interesting to the firm managers to know that whether manufacturers, network partners and consumers are in the better off position using this architect. To sum up, the proposed model suggests the centralization of firm resources for applying innovation architecture. A Concluding Thought The identification of major enablers of resource based service - strategic framework provides a unified service shell framework for service innovation from which more focused and synergistic research can be concluded. While much of the previous research has been made taking disaggregated service innovation framework, the proposed model can help in achieving significant insights into the topic. We understand that the relationship between academic and strategic implementation of service innovation strategy can be improved using the current framework. 10

13 Page 13 of 20 ANZAM 2014 References Agarwal, R. and Selen, W. (2014) The incremental effects of dynamic capability building on service innovation in collaborative service organizations Journal of Management and Organization, Volume 19, Issue 5, pp Agarwal, R. and Selen, W. (2011), Multi-dimensional nature of service innovation Operationalisation of the Elevated Service Offering construct in collaborative service organisations, International Journal of Operations & Production Management, volume 31, Issue 11, p Agarwal, R. and Selen, W. (2009) Dynamic capability building in service value networks for achieving service innovation, Decision Sciences, Volume 40, Issue 3, p Bharadwaj, S. G., Rajan, V. and John, F. (1993), Sustainable competitive advantage in service industries: a conceptual model and research, Journal of Marketing, 57(4), Bharadwaj, S., Terry, C., and Songpol, K. (2005), Marketing, market growth, and endogenous growth theory: an inquiry into the causes of market growth, Journal of the Academy of Marketing Science, 33(3), Blazevic, V. and Lievens, A. (2008), Managing innovation through customer coproduced knowledge in electronic services: an exploratory study, Journal of the Academy of Marketing Science, 36(1), Churchill, G. A. Jr. (1979), A paradigm for developing better measures of marketing constructs, Journal of Marketing Research, Vol. 16(1), De-Luca, L. and Gima, K. A. (2007), Market knowledge dimensions and cross-functional collaboration: examining the different routes to product innovation performance, Journal of Marketing, Vol. 71(1), Gruner, K. E. and Christian, H. (2000), Does customer interaction enhance new product success?, Journal of Business Research, Vol. 49(1), Hair, J. F. Jr., Anderson, R. E., Tatham, R. L., and Black, W. C. (2006), Multivariate data analysis (5 th ed.). Pearson Edition, New Delhi. Han, Jin K., Kim Namwoon and R. K. Srivastava (1998), Market orientation and organizational performance: is innovation the missing link?, Journal of Marketing, Vol. 62(1), Hipp, C. and Grupp, H. (2005), Innovation in the service sector: the demand for service-specific innovation measurement concepts and typologies, Research Policy, 34(4), Hurley, R. F. and Tomas, M. H. (1998), Innovation, market orientation, and organizational learning: an integration and empirical examination, Journal of Marketing, Vol. 62(3), Hunt, S.D. (1995), The resource advantage theory of competition: toward explaining productivity and economic growth, Journal of Management Inquiry, 4(4),

14 ANZAM 2014 Page 14 of 20 (2000a), A general theory of competition: too eclectic or not eclectic enough? Too incremental or not incremental enough?, Journal of Macromarketing, 20(1), (2000b), A General Theory of Competition: Resources, Competences, Productivity, Economic Growth. California: Sage Publications. (2002), Marketing and a general theory of competition, Journal of Marketing Management, 18(1/2), Lievens, A. and Moenaert, R. K. (1999), Communication flows during financial service innovation, European Journal of Marketing, 34(9), Liu, L. L. & Chen, X. G. (2007), Service Innovation Mechanism Based on Customer-Employee Interaction, paper presented at 14th International Conference on Management Science & Engineering, Harbin, China (20-22 August, 2007) Lovelock, C. H. and Wright, L. (2002), Principles of Service Marketing and Management. Upper Saddle River, New Jersey: Prentice Hall. Lusch, R.F., Vargo, S.L. and O Brien, M. (2007), Competing through service: insights from servicedominant logic, Journal of Retailing, 83(1), Madhavaram, S. and Hunt, S.D. (2008), The service-dominant logic and a hierarchy of operant resources: developing masterful operant resources and implications for marketing strategy, Journal of Academy of Marketing Science, 36(1), Narver, J. and Slater, S. (1990), The effect of a market orientation on business profitability, Journal of Marketing, Vol. 54 (4), Ordanini, A. and Parasuraman, A. (2011), Service innovation viewed through a service-dominant logic lens: a conceptual framework and empirical analysis, Journal of Service Research, 14(1), Podsakoff, Nathan P., Jeffery A. LePine and Marcie A. LePine (2007), Differential challenge stressor hindrance stressor relationships with job attitudes, turnover intentions, and withdrawal behavior: a metaanalysis, Journal of Applied Psychology, Vol. 92(2), Prahalad, C. K. and Ramaswamy, V. (2004), Co-creating unique value with customers, Strategy and Leadership, Vol. 32(3), 4-9. Schumpeter, J.A. (1939), Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process. New York and London: McGraw-Hill. Sheth, J. N. (2011), Reflections on Vargo and Lusch's systems perspective, Industrial Marketing Management, Vol. 40(2), Storey, C. and Kahn, K.B. (2010), The role of knowledge management strategies and task knowledge in stimulating service innovation, Journal of Service Research, 13(4),

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16 ANZAM 2014 Page 16 of 20 Table 1: The chronological evaluation of taxonomies of service innovation S. No. Author Year Contribution 1. Schumpeter 1939 The innovation concept covers five areas: (i) product innovation; (ii) process innovation; (iii) market innovation; (iv) input innovation; and (v) organizational innovation. 2 Rogers, E. M Distinguished innovations as radical (new-to-the-market, new-tothe-company, new delivery process) and incremental (service modifications, service line extension and service repositioning) a typology applicable both in the new product or service development. 3 Gallouj 1997 The model focuses on the black box of innovation process and has worked well as regarding the innovation by improvement, addition/subtraction, substation and recombination. 4 Hertog 2000 Identifies four dimensions of service innovation which includes, service provider, client interface, service delivery system and technology options 5 Avlonitis, Paulina, Spiros 2001 Explored the typology of product innovativeness in the services industry and argued for assimilation of the concept in service science. He proposed, (a) Innovation in services i.e. in service products and, (b) Innovation in service processes. 6 Drejer 2004 Suggested that service and manufacturing innovation show more similarities than differences based on technological perspective. 7 Hipp and Grupp 2005 Differentiated between scale-intensive, supplier-dominated and knowledge-intensive industries as well as specialist manufacturers. 8 Liu and Chen 2007 Represents 3V (value proposition, value deployment, value appropriation), 3D (service delivery, design, development) for an integrated service framework. 14

17 Page 17 of 20 ANZAM 2014 Table 2: Contributors on service innovation using RA or SDL framework Data and references David Ballantyne and Richard J Varey (2008) Andrea Ordanini and A. Parasuraman (2011) Michael Merz, Yi He and Stephen Vargo (2009) Gronroos (2004) Sundar Bharadwaj, Terry Clark, Songpol Kulviwat (2005) Shelby D. Hunt (2000b) Timothy G. Habbershon and Mary L. William (1999) Shelby D. Hunt & Dennis B. Arnett (2004) Concept/ Estimation Industrial marketing Empirical Paper Brand Management General Marketing Marketing Strategy Marketing Economics Marketing Strategy Marketing Strategy Theoretical Foundation Service Dominant Logic Framework Service Dominant Logic Framework Service Dominant Logic Framework Service Dominant Logic Framework Resource Advantage Theory Resource Advantage Theory Resource Advantage Theory Resource Advantage Theory Key Conclusion Figure 1: Conceptual Framework and Hypothesis It puts service as an interactive process and more so goods also render service and have value in- use. A framework for investigating the antecedents and consequences of service innovation has been proposed. Parallel to service logic, brand logic views brand in terms of collaborative, value cocreation activities of firms and all of their stakeholders and brand value in terms of the stakeholders collectively perceived value-inuse. The paper puts S D logic as a holistic marketing theory. As per the article the SDL approach is not only based on grounded theory, it also includes the premises of good s marketing. It puts a conceptual model arguing that the effect of firm endogenous actions on market growth is mediated by knowledge creation, matching, and diffusion. The paper contributes to explaining observed differences in quality, innovativeness, and productivity between market-based and command-based economies. A theoretical framework has been provided for assessing the competitive advantages of family firms. To achieve competitive advantage and thereby, superior financial performance, firms should identify segments of demand, target specific segments, and develop specific marketing mixes for each targeted market segment. 15

18 ANZAM 2014 Page 18 of 20 Figure 2: Service Innovation Framework 16

19 Page 19 of 20 ANZAM 2014 Table 3: Construct indicator variables and scale reliability values S. No Measure (Abbrev.) Construct and indicator variables Scale Reliability (α) 1 SCO Collaborative efforts a SCC Customer collaboration b SBPC Business partner collaboration c SKIM Knowledge integration mechanism SCMO Market orientation SCIO Innovation orientation ITI Information technology 0.86 Infrastructure 5 SCCO Customer Orientation FLSI Service Innovation FSCA Sustainable competitive advantage of the firm 0.93 Table 4: The Descriptive statistics for the studied variables SCO SCMO SCIO ITI SCCO FLSI FSCA N Valid Missing Skewness Std. Error of Skewness Kurtosis Std. Error of Kurtosis Table 5: The correlation table among the variable and cronbach s alpha along the diagonal Collaborative efforts (0.65) 2 Market Orientation 0.341* (0.83) 3 Innovation Orientation 0.426* 0.218* (0.80) 4 IT Infrastructure 0.227** 0.126* 0.311* (0.86) 5 Customer Orientation 0.126* 0.229* 0.116** 0.463** (0.88) 6 Service Innovation 0.476* 0.261** 0.223* 0.326* 0.185* (0.87) 7 SCA of the firm 0.373** 0.187* 0.261* 0.266* 0.287** 0.275* (0.93) ** Correlation is significant at the 0.01 level (2 tailed), * correlation is significant at the 0.05 level (2 tailed), Note: alpha values in the parenthesis along with the diagonal 17

20 ANZAM 2014 Page 20 of 20 Table 6: Results of the Least Square (LS) regression Hypo. No Variable Parameter Estimate Standard Error P-value Hypothesis test results 1 Dependent: FLSI Intercept H1: Supported SCO a Dependent: SCO Intercept SCC SBPC SKIM Dependent: FLSI Intercept H2: Supported SCOO Dependent: FSCI Intercept H3: Supported ITI Dependent: FLSI Intercept H4: Supported SCCO * SCO Dependent: FSCA Intercept FLSI *at 95 percent significance level Table 7: The result of moderator effect of Customer orientation with Collaborative efforts Coefficient (β) t Sig. Tolerance VIF (constant) SCCO SCO SCCO * SCO Adjusted R Square = 0.218, Sig. F change (0.000) Dependent Variable: Service Innovation, FLSI 18