Innovation in Services: A Literature Review

Abstract

The article reviews the literature relevant to innovation in services, which has flourished since the 1990s. We discuss the definition of service and to what extent the characteristics of service output have influenced the conceptualization of innovation in services. Then, based on the literature review, we develop a conceptual framework for innovation in ser- vice sector, which classifies innovation in service sector into three main approaches: i) as- similation, where innovation in the service sector is assimilated from innovation in manufacturing sector; ii) demarcation, which differentiates innovation in service sector from the traditional conceptualization of innovation in manufacturing sector; and iii) syn- thesis, which aggregates both assimilation and demarcation approaches within a common conceptual framework. We discuss the relationship between innovation in services and eco- nomic performance using productivity and employment as two indicators of performance.