The incremental and cumulative effects of dynamic capability building on service innovation in collaborative service organizations

Abstract Increasingly, innovation in services is brought to market by a network of firms, or alliance networks, asset orchestration, knowledge sharing capabilities, resources and competencies, and operated in a coordinated manner. Recent literature has recognized the evolutionary nature of dynamic capabilities in that managers may adapt their alliance networks dynamically to sustain competitive advantage, as well as identified a continuing gap in the lack of empirical studies on feedbacks between network environments, dynamic capabilities, and innovation performance. In addition, other literature calls for more quantitative research on examining dynamic capabilities in a network environment to provide a better understanding of how firms should direct their resources and capabilities to successfully respond to competition. This study contributes towards closing both gaps by empirically examining the cumulative and incremental effects of fostering and deploying different dynamic capabilities on services innovation, and by quantifying their impact, thus providing managers with a better account of how services innovation comes about in a service value network. It does so using empirical data from 449 respondents from a telecommunications service provider in Australia and its partnering organizations, using structural equation modelling.