Customer orientation and innovation: A comparative study of manufacturing and service firms

This study investigates the effect of customer orientation on innovation performance in manufacturing and service firms by comparing their innovation mechanisms. Based on a sample of 1646 manufacturing firms and 686 service firms, our results indicate that customer orientation positively affects service innovativeness and product innovativeness in service firms and manufacturing firms, respectively, and that such effects are mediated by two important firm resources: supplier collaboration and technological capability. However, customer orientation has a stronger total effect on innovativeness and supplier collaboration has a stronger mediating effect on the relationship between customer orientation and innovativeness in service firms. Although many previous studies have indicated that technological capability is relatively unimportant in service firms, our analyses indicate that it is now an equally important factor in service innovation and manufacturing innovation. These findings contribute to our understanding of innovation in the service and manufacturing industries, and to the literature on customer orientation, the resource-based view of the firm, and service-dominant logic.