Building service innovation capabilities: What’s often overlooked?

Published September 2019 by Associate Professor Jay Weerawardena and Professor Janet McColl-Kennedy​

Associate Professor Jay Weerawardena

Salunke, S., Weerawardena, J., & McColl-Kennedy, J. R. (2019). The Central Role of Knowledge Integration Capability in Service Innovation Based Competitive Strategy. Industrial Marketing Management, 76, 144-156,


  • Capability building remains one of the top three strategic priorities for executives around the world. Although business needs have evolved, the methods of building those capabilities have not, leading to such efforts falling short of their objectives (McKinsey, 2014).
  • Companies that perform best, particularly at service innovation, not only rely on the traditional sources of customer and competitor knowledge, but also focus on broadening and reinforcing their capabilities base.
  • A robust approach that assesses current capabilities, particularly focussing on ‘what’ and ‘how’ knowledge is configured, will help uncover gaps in capability building leading to sustainable performance outcomes
Professor Janet McColl-Kennedy

What’s new

  • We demonstrate, using quantitative survey panel data sourced from professional service firms across a range of industries in Australia (N=192 comprising building and construction, 48%, architectural, engineering and design services, 28%) and the US (N=261 comprising healthcare, 20%, education, 13%, professional scientific and technical, 10%, and telecom, financial and construction services 6% each), the positive and statistically significant impact of senior managers’ entrepreneurial service strategies on episodic and client-focused learning on knowledge integration, resulting in service innovation and sustainable competitive advantage.
  • We found some country-based differences - a non-linear relationship for the Australian sample, but not the American sample. In the Australian sample, the effect was an inverted U-shape (i.e., quadratic), indicating that the positive effect of knowledge integration capability decreases over time, past a certain point. However, in the American sample, the effect of knowledge integration capability continues in a straight line (i.e., linear) and does not peter out after a certain point.
  • The key insight? Knowledge acquisition, while important is only the first step. New knowledge, even if gained from both internal and external sources, is not enough – it must be integrated with existing knowledge to innovate for sustainable competitive advantage. However, acquiring new knowledge is a necessary, but not sufficient, condition for service innovation to occur.

Bottom line

Regardless of country of origin, in both samples and sourced across several professional service industries, our model shows the importance of integrating new knowledge with existing knowledge for sustainable competitive advantage.


7 point plan

  1. Be client-focused, rather than competitor-focused, to stay ahead of competitors.

  2. Integrate new knowledge with existing knowledge to achieve sustainable competitive advantage.

  3. Senior service managers should be entrepreneurial (i.e., adaptive) to client needs.

  4. Continuously innovating is key to sustainable competitive advantage – don’t stop moving!

  5. Knowledge alone is not enough – how well (i.e., capably) it is integrated is the key.

  6. The better the knowledge integration capability, the better the capacity to avoid copy-cat strategies from competitors (i.e., inimitability), thus maintaining one’s dynamic capabilities for a sustainable competitive advantage.

  7. Entrepreneurial key decision-makers, such as senior service managers, are the building blocks for a firm’s overall service entrepreneurship orientation, which is required for a superior place in the market.


Contact Associate Professor Jay Weerawardena or Professor Janet McColl-Kennedy​ to learn more about the research.

Learn more about Service Innovation Alliance.