Measuring Perceived Service Innovation Typologies in Retail Industry

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Focusing on measurements scales which were used to measure service innovation changed periodically, researchers adopted product innovation scales to measure service innovation. The number of dimension/typology used to was not constant where the researchers adopted different combination of dimensions/typologies to measure service innovation. It was also observed that there are numerous literatures measuring service innovation from internal perspective (employees or managers) whereas there is dearth in literatures measuring service innovation from external perspective (customer perspective). Further the indicants used for measuring typology/dimension of service innovation also varied where some researchers used uni-dimensional indicants whereas others used multi-dimensional indicants.

Service marketing literatures stressed the importance of service innovation and noted that frequent innovation within a firm results in both financial and non-financial performance. Particularly, authors claimed that service innovation positively affects firm’s performance based on two theoretical arguments. Firstly, early mover advantage theory (Lieberman & Montgomery, 1988) and secondly, the performance gap theory (Damanpour et al., 2009).

Specific to non-financial performance, literatures (Urban et al., 1993 and Sawhney et al., 2005) found that innovation positively affects customer performance. That is, customers engage not only in purchase behaviour but also in re-purchase behaviour, cross-buying behaviour, for the growth of reputation (belief/trust/positive opinion) of the firm and delivering Word-of-Mouth (hereinafter WOM) where WOM is passing either positive or negative information from one person to another. The term Customer engagement is defined as “active interactions of a customer with a firm, with prospects and with other customers, whether they are transactional or non-transactional in nature” (Kumar et al., 2010)

Earlier service innovation literatures focused majorly on other customer engagement behaviors such as purchase behaviour, cross-buying behaviour, satisfaction and loyalty, only limited studies linked customers’ WOM as an outcome of service innovation. Further those innovation studies relating WOM mostly concentrated on product innovation (Arndt, 1968; Czepiel, 1974) whereas WOM is particularly important for service innovation since it is complex and involves high risk in it.

The direct effect between service innovation and WOM could be narrowed when other firm related variable(s) intervene the relationship between these two variables. One such variable is corporate reputation which is an important intangible asset of a firm. Even though, Callen and Fernandez (2014) empirically examined the mediation role of reputation between innovation and performance of the firm, it was with product innovation and market performance (financial performance) whereas; there is a dearth of studies considering corporate reputation as mediator with respect to service innovation and non-financial performance. Further it is noted from existing literatures that frequent innovation helps the firm in gaining reputation and when reputed firm continues in introduces new concepts/ideas and when it is attractive and satisfies the need of the customers would eventually engage customers in giving positive WOM in market (Kumar et al., 2010 and Jaakkola & Alexander, 2014).

Thus, in this study an attempt is made to develop scaled items to measure service innovation in retail industry and the predictive validity of the scale is tested by examining the effect of service innovation typologies on corporate reputation and customer engagement behaviour namely Word-of-Mouth. Finally, the mediation analysis is performed to examine the role of corporate reputation between service innovation and WOM.

2. REVIEW OF LITERATURE

In this section, detailed theoretical and empirical studies related to Measurement of service innovation, problems in measuring service innovation, how the existing literatures measured service innovation using typologies, need for the multidimensional scale were reviewed and presented. Further to estimate the nomological validity two new constructs such as corporate reputation and word-of-mouth was included and the detailed review on linking these constructs are presented. Initially, the review on earlier studies clarifies the direct relationship between service innovation and WOM, followed by the indirect effects such as service innovation on corporate reputation and the impact of corporate reputation on word-of-mouth. Finally, review on the mediating role played by corporate reputation between service innovation and WOM is presented along with proposed conceptual framework.

2.1. MEASUREMENT OF SERVICE INNOVATION

It is evident from the classification of innovation studies (Fig 1) that there is a difference in measurement of service innovation. According to Coombs & Miles (2000) there are three major approaches followed by researchers to measure service innovation and they are: (a) Assimilation approach, where service innovation was measured by the constructs similar to the measurement of product innovation (Vergori, 2013; Kim et al., 2016 and Crowley & Crowley, 2017), (b) Demarcation approach through which authors like and Amara et al. (2016) and Gallouj and Gallouj (2017) criticized that the assimilation approach did not consider certain characteristics of services, and thus there need a exclusive measurement scale, and (c) synthesis approach through which authors (Gallouj & Weinstein 1997; Coombs & Miles 2000; Carlborg et al., 2014; Snyder et al., 2016 and Adams et al., 2016) stated that some characteristics of services are similar to product thus product innovation measures must also be included during the measurement of services.

The second major measurement issue was that the measurement of service innovation was mostly related to internal perspective (firm perspective) where there are only limited studies related to external perspectives (customer). Thirdly, there was a difference in using measurement scale where, authors like Ordanini and Parasuraman (2011) and Cheng and Krumwiede (2012) used multi-dimensional scale with indicants and certain authors like Santamaria et al. (2012) and Vergori (2013) used dichotomous scale to measure service innovation. This difference in approaches, methods and scales created confusion on how service innovation can be measured across industries.

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Fig 1: The review on methods