Organisational Culture and Leadership as Mediators of Service Innovation and Firm Competitiveness: A Study of an Emerging Economy

It has become imperative for researchers to mark out the institutional limits and conditions within which innovation is the most useful strategy and to establish the extent to which its efficacy is conditioned by innovative culture and leadership of the service firm. This paper makes contribution to the service innovation literature by showing the internal boundary conditions under which service innovation can effectively enhance the competitiveness of the service firm. An empirical research design comprised two sets of data collected from service managers; the first for validation and the second for structural analysis of our framework. Five service innovation dimensions were found and that innovation leadership partially mediated the relationship between the service innovations and a service firm’s competitiveness. Innovative culture also mediates the service innovations and competitiveness. In contrast to previous studies which examined the direct effect of innovation on competitiveness, our study found that the mediating role of internal conditions brings about complementarity of strategic assets which produces sustainable competitive advantage to the service firm. The practical implication is that service firms must be equally interested in creating a fundamental service philosophy through their culture and leadership to build competitive advantages.