Development and Validation of an Instrument to Measure the Service Innovation Capability Maturity of SMEs

Small and medium-sized enterprises in the service sector must continuously innovate and adapt to remain competitive and ensure their survival. Key to this is their service innovation capability, a dynamic capability underpinning the repeated generation of new services and improvement of existing ones. However, despite the significance of this capability within the literature, there are serious gaps in how it is understood, and no measure exists of its effectiveness or maturity. As a result, practitioners are unaware of their service innovation capability performance or where resources should be directed for its improvement. Informed by a positivistic research philosophy, this study addressed this gap by constructing and validating a formative measure of service innovation capability maturity for SMEs. As the maturity score for this capability is caused by its three subdimensions; User Involvement, Strategising, and Networking capabilities; an index construction procedure was synthesised and applied to its development. Using a cross-sectional online survey methodology, the responses of 284 service organisations located in the Republic of Ireland were used to test the instrument. Collected data were utilised to subject the index to rigorous testing that confirmed the acceptability of goodness-of-fit statistics, variance explained, the validity of individual indicators, the absence of excessive multicollinearity, and the validity of its structural model. The novel and original measure developed in this study is the first of its kind and makes several major contributions to theory and practice. Specifically, the study’s findings provide empirical support for the three subdimensions as predictors of service innovation capability performance, its synthesis and execution of a best practice index construction procedure offer a valuable template to researchers with similar objectives, and the managers of SMEs are provided with a tool to quantitatively understand their capability maturity and learn where their effort or attention ought to be directed to achieve improvements.