The Effects of Service Innovation on Customer Satisfaction and Firm Value
By Thomas Dotzel, Venkatesh Shankar, Leonard L. Berry
2008
Abstract
As economies in developed countries are increasingly driven by services, the introduction of new services to satisfy customers and improve firm value is becoming a critical issue for managers in both services- and goods-dominant firms. Indeed, the member companies of the Marketing Science Institute have identified service innovation as one of the priority research topics for scholarly research. However, prior research on innovation has primarily focused on goods, leaving important research questions relating to service innovation open. We empirically investigate how service innovation influences customer satisfaction and firm value, while controlling for both firm- and market-specific factors. Furthermore, we examine how these effects vary across different types of service innovations (market creating versus non-market creating) and across different types of firms (services- versus goods-dominant). We develop a model of simultaneous equations that link service innovation, customer satisfaction and firm value. We estimate our model on a unique panel data set that we assembled from multiple data sources across multiple industries. Preliminary findings indicate that while service innovation does not have a direct effect on customer satisfaction, it has a lagged positive effect on firm value. Our findings offer executives of both goods- and service-dominant firms important insights about the value of different types of service innovations for their companies.