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Background and scope of the special issue
Article Type: Guest editorial From: Baltic Journal of Management, Volume 6, Issue 3
The term “innovation” is nowadays used in almost every context in daily life. Here, we follow the definition put forward by Dasgupta and Gupta (2009): “Innovation is typically understood as the successful introduction of something new and useful, for example, introducing new methods, techniques, practices, or new or altered products and services.” Therefore, today, maybe more than ever before, it is important for companies to continuously build up sustainable competitive advantages by offering innovative products and services.
Most products are a combination of goods and services and the continuum of services varies according to domination of tangible or intangible elements (Shostack, 1987). Herein, we consider services as a broad term covering acts, efforts, or performances exchanged from the producer to end-user without ownership rights (i.e. banking, retailing, education, health care, catering, accommodation, etc.). The aim of this special issue is to advance our theoretical and empirical understanding of the innovation origins and its manifestations in the service sector.
There are various reasons for switching consideration of services as a very traditional sector to being very dynamic nowadays. One reason is the development of information technology, which contributes to service sector innovation far beyond its role in the computing and telecommunications services sectors. Research data reveal that a higher proportion of firms are found to be innovative in services than in manufacturing (as in the Estonian data) (Masso and Vahter, 2008). They argue that the services sector deserves much more attention, not only due to its higher and increasing share in the economy, but also because of its innovative nature.
Another reason derives from the fast development and dynamics of service sector in the New European countries, which has been seen rather as Old Europe’s follower, paying little attention to innovation. This viewpoint is challenged by today’s research arguing that customer orientation is at least as important in New Europe as in Old Europe, while organizational innovativeness appears more important in New Europe to drive both customer service and financial performance (Theoharakis and Hooley, 2008). It is important to mention that the nature of the relationship between service provider and customer has got some influences from the “past” times in post-transitional countries. One of the main problems derived from the matter that in most of the communist countries service providers were “dividers” and this role has been gradually replaced by that of service providers (Vadi and Suuroja, 2006). Besides, the above mentioned, there are other reasons, such as globalization, change of demand structures, to name but a few.
In the last few decades, there has been a considerable switch in considering the importance of service sector in most developed economies. This change is, at least in part, a result of phenomena such as technological change, the evolution of relative prices and globalization, often resulting in manufacturing bases being moved to lower labor-cost regions, both within and outside the European Union (EU). Services now account for more than 60 per cent of value added and GDP in the EU economy (Eurostat). Thus, it is valuable to understand the service sector peculiarities that may serve as drivers to new economic growth and value for the customers. The literature review shows also that service innovation represents an increasingly important field of research (Castellaccia, 2008).
The special issue assembles papers from a broad range of innovation initiation and manifestation (Table I). The papers are characterized by four aspects. First, relation to innovation is regarded and here the origins and manifestations of innovation are differentiated. The first group of papers provides some hints on how innovation is initiated and the second group characterizes manifestations of innovation. While the former focuses on the issues that create innovation in services and are directly related to it, the latter touches areas of services affecting, or being affected indirectly by, innovation. Second, with respect to focus it appears that one shows that innovation is an outcome of certain decisions, three papers deal with different forms of organizational innovativeness (organization itself, work forms and internal processes). Third, the level of analysis can be accentuated. In particular, four papers investigate innovation on the organizational level (i.e. company) and one paper handles a wider perspective – country-level or sector-specific ideas. Fourth, external and internal factors are analyzed in the studies. This aspect gives possibility to understand how and to what extent services may depend or control factors inside or outside of an organization.
The first two papers (Triin Kask; GeorgeTsekouras, Efthimios Poulis and Konstantinos Poulis) center their discussion and/or analysis on the importance of strategy for initiating and implementing innovations. Kask explains how strategic decisions have resulted in innovations on an organizational level in an Estonian IT company. The results indicate that the main reason for innovations was to keep up with competitors and initially innovation was seen as a practical issue rather than a particular strategy. However, the potential of different type of innovations is often determined by a company’s strategic vision, proactive nature and supporting dynamic capabilities.
The second paper (GeorgeTsekouras, Efthimios Poulis and Konstantinos Poulis) focuses on how innovations occur in shipping companies. The selected cases illustrate that innovations become essential if company has a growth strategy and they result in new capabilities – upgraded customer experience, customer base and new markets. Innovation is not an imperative if a company only wants to survive, maintaining its current market position.
These opening papers consider innovations as outcomes, while the following three regard various manifestations of innovations, considering modes of work organization, such as virtual work (Gerda Mihhailova, Kandela Õun and Kulno Türk), internal processes, such as performance measurement (PM) (Kertu Lääts, Toomas Haldma and Klaus Moeller) and an innovative approach of gathering information for a country’s tourism strategy (Andres Kuusik, Margus Tiru, Rein Ahas and Urmas Varblane). The paper by Gerda Mihhailova, Kandela Õun and Kulno Türk indicates on the sample of 323 service organizations in Estonia that higher level of work virtuality leads to the lower level of job satisfaction and the authors explain it with poor management techniques and ICT mediated communication.
Table I Overview of the scope of special issue
Kertu Lääts, Toomas Haldma and Klaus Moeller take a retrospective look at the dynamics in PM practices in service companies compared to manufacturing companies in the period between 2004 and 2007. They discovered a persistence of a rather simplified PM approach in both sectors, though with the sign of increasing adoption of integrated multidimensional and innovative PM tools. Their analysis showed an increase of the usage intensity of PM methods in both service and manufacturing companies and there were no distinctive PM change path attributes, though the overall number of significant PM methods usage changes was lower during this period in the service companies. Moreover, market share as performance indicators, and cost budgeting as PM method were more associated with the service sector companies, whereas manufacturing companies relied more on quality management methods and cost element accounting (separating variable and fixed costs).
In the last paper, the authors demonstrate how technological innovation (mobile positioning technology), provides a basis for marketing innovation, which further provides prerequisites for organizational innovation in the country destination marketing policy. This paper, written by Andres Kuusik, Margus Tiru, Rein Ahas and Urmas Varblane, contributes to the improvement of the existing classification and constructing a new approach to the segmentation of a country’s repeat visitors. The authors point out the ability of passive mobile positioning methods to get an overview of the visiting frequency and loyalty among the country visitors as an additional way for providing the basis for destination marketing policy. This method provides a database of characteristics of repeat visitors, such as their country of departure, visiting frequency, timing, etc. Those characteristics could be used in order to identify new segments of repeat visitors and thus it serves as the input to the process of improvement of a country’s tourism policy.
Although the service sector has often been characterized as a locus of low wage, unproductive and un-innovative jobs, some recent studies have confirmed that services are indeed innovative and, in some areas, more innovative than manufacturing. Thus, as the economies across the world have become more service oriented, so has the importance of uncovering the specific traits of innovation in services. These papers have unpacked some issues regarding the origins of innovation and how innovation is manifested in services.
This work was supported by the Estonian Ministry of Education [target funding No. SF0180037s08] and grant by Estonian Science Foundation (Grant No. 7018).
Maaja Vadi, Rebekka Vedina, Kadri KarmaGuest Editors
Castellaccia, F. (2008), “Technological paradigms, regimes and trajectories: manufacturing and service industries in a new taxonomy of sectoral patterns of innovation”, Research Policy, Vol. 37 Nos 6/7, pp. 978–94
Dasgupta, M. and Gupta, R.K. (2009), “Innovation in organizations: a review of the role of organizational learning and knowledge management”, Global Business Review, Vol. 10, pp. 203–24
Masso, J. and Vahter, P. (2008), “Technological innovation and productivity in late transition Estonia: econometric evidence from innovation surveys”, The European Journal of Development Research, Vol. 20 No. 2, pp. 240–61
Shostack, G.L. (1987), “Service positioning through structural change”, Journal of Marketing, Vol. 51 No. 1, pp. 34–43
Theoharakis, V. and Hooley, G. (2008), “Customer orientation and innovativeness: differing roles in new and old Europe”, International Journal of Research in Marketing, Vol. 25 No. 1, pp. 69–79Vadi, M. and Suuroja, M. (2006), “Training retail sales personnel in transition economies: applying a model of customer-oriented communication”, Journal of Retailing and Consumer Services, Vol. 13 No. 5, pp. 339–49