The Impact Of Customer Co-production On Service Innovation Performance

Continuous innovation is the source of vigorous development in service industry. In fact, service innovation has become the key to the socio-economic growth and success. Unfortunately, Comparing to the rapid development of the service industry, the corresponding researches on service innovation have lagged far behind the practice. Traditional innovation Theories were Technological innovation-oriented, then if we applied these theories to service innovation without considering the uniqueness of the service that will be problematic. So, there is an urgent need to take full account of the service uniqueness when we take a further in-depth study of service innovation.Comparing to Manufacturing industry, one of the most significant characteristics of service is that customers often involve in service production and delivery process which will directly or indirectly influence the company's operations and outcomes. This can be more significant especially in knowledge-intensive business service firms, where their customers play a critical role in helping them to "co-create" or "co-produce" the knowledge-based service solution. In that case, the role of customer changes from passive buyer to co-producer in service. Then, we may ask how this customer co-production process works? How can this co-production process affect the service innovation processes and outcomes? What is the inherent influence mechanism? Extant studies on service innovation put little attention to customer-focused service innovation strategies while mainly concentrated on the internal service innovation strategies. Especially in China, the researches on customer co-production has just started, only few studies began to analyze the relationship between customer co-production and service innovation performance, most of them are qualitative analysis, empirical studies are rare. Therefore, the answers to the questions above will absolutely help us to broaden the perspective of the service innovation researches, and then further enhance the integrity and continuity of service innovation theories. In this paper, the influencing mechanism of customer co-production on service innovation performance is studied based on the hypothetic deduction and logical reasoning. The technique of combining theoretical and empirical analysis is used in the study. First, service innovation, customer co-production, customer knowledge transfer are analyzed based on literature review. Then the hypothesis that customer co-production influencing service innovation performance through customer knowledge transfer is proposed. Second, the corresponding initial scales of the variables in this study are proposed based on the literature review. The interview method is employed to improve the description and content of the measurement items based on the logical reasoning of theoretic hypothesis. Third, in the pre-testing, SPSS18.0is used to purify the Measures and analyze their reliability. Exploratory factor analysis is used to modify he scales and to improve their validity and reliability. In the formal questionnaire, reliability test and confirmatory factor analysis are used to test the reliability and validity of the questionnaire. At last, Amos7.0is used to verify the impact of customer co-production on service innovation performance, the mediating role of customer knowledge transfer and the moderating role of innovation orientation between customer co-production and service innovation performance. Based on the proposing of a series of hypotheses and the verification of the theoretical model by questionnaire data, the following conclusions are drawn as follows:(1) Customer co-production can be divided into three dimensions: information communication, cooperation, adaptive adjustment. Based on the extant definition of customer co-production, this study proposed an integrated definition of customer co-production through generalizing the arguments of behavioral perspective, relationship perspective and value creation perspective. This integrated definition can help us understand the complicated nature of this concept. In terms of this definition, we can describe customer co-production as a process: role clarity——role making——conflict coordination. Therefore, customer co-production can be according divided into three dimensions:information communication, cooperation, adaptive adjustment. Then based on extant literature and the interviews of experts and managers the initial measurement questionnaire is proposed. Small sample pre-test, large sample test, EFA and CFA are used to test the date from the questionnaire. The final statistic result indicates that this questionnaire's reliability and validity are both acceptable which verifying the division of this concept.(2) The impact of customer co-production on service innovation performance is proposed. and verified. The theoretical model of customer co-production and service innovation performance is built by generalizing the theories of resource-based-view, relationship marketing and open innovation, and verified by SEM (the standard path efficient is0.6, and the value of P is0.000). It is found that information communication (the standard path efficient is0.43, and the value of P is0.000), cooperation,(the standard path efficient is0.45, and the value of P is0.000), adaptive adjustment (the standard path efficient is0.51, and the value of P is0.000) have significant positive influence on service innovation performance.(3) The mediating role of customer knowledge transfer between customer co-production and service innovation performance are verified. In terms of Input-transfer-output model, customer co-production can be seen as resource input behavior, service innovation performance can be seen as the output of customer co-production, and customer knowledge transfer can be therefore seen as the intermediate link. This conclusion indicates the influence mechanism of customer co-production on service innovation performance. The results show that the relationship between customer co-production on service innovation performance is fully mediated by customer knowledge transfer. It also indicates that the relationships between the sub-dimensions of customer co-production on service innovation performance are fully mediated by customer knowledge transfer as well. This conclusion explains that customer co-production promote the process of customer knowledge transferring to the organization. During this process, knowledge about customers, knowledge from customers and the new knowledge which is created by the interaction between customers and the company are all transformed to organizational knowledge. Then this knowledge can be applied to service innovation activities, as a result, to improve the service innovation performance.(4) The moderating role of innovation orientation is built and verified. It is found that the relationship between customer co-production and service innovation performance can be affected by innovation orientation to some extent. Cluster analysis method that using7innovation orientation indexes is used to cluster all 231samples into two groups, named high-innovation-orientation group and low-innovation-orientation group respectively. Groups comparing methods in AMOS is used to verify whether the relationship between customer co-production and knowledge transformation can be affected by innovation orientation. The results indicate that the impacts of customer co-production on customer knowledge transfer in the two groups are significant different. Specifically, the impact in high-group is higher than in the low-group. That is to say, the relationship between customer co-production and customer knowledge transfer can be positively affected by innovation orientation. In addition, it is found that the impacts of customer knowledge transfer on service innovation performance in the two groups are significant different. Specifically, the impact in high-group is higher than in the low-group. That is to say, the relationship between customer knowledge transfer and service innovation performance can be positively affected by innovation orientation.Some theoretical contributions and innovations of this paper are given as follows:First, the introduction of customer co-production theory extends the service innovation research perspective. Extant service innovation researches mainly employed suppliers-oriented innovation perspective, such as "inside-out" service innovation model. It is a model that mainly uses the internal resources to promote service innovation at first, and then promote to the external market. This study proposed "outside-in" service innovation model based on customer-oriented perspective. In other words, enterprise mainly uses the external resources, especially customers who are co-producing the service to promote service innovation at first, and then complete service innovation in the organization. Knowledge-intensive business enterprises are analyzed in this study. Introducing customers into service enterprise innovation system will undoubtedly provide a new perspective on service innovation researches in the era of knowledge economy.Second, the mediating role of customer knowledge transfer between customer co-production and service innovation performance are verified. This study proposed a service innovation strategic model in which customer participates in the service innovation process through co-production. Input-transfer-output model is used to indicate and verify the mediating role of customer knowledge transfer between customer co-production and service innovation performance. Customer knowledge transfer as a mediating variable can fully expand the customer's role as external knowledge source of enterprises in the era of knowledge economy. This model also indicates that customer is not only partial employer to enterprises. At the same time, the model links customer co-production with service innovation performance together.Third, a three-dimension model of customer co-production is built and verified. Researchers have not reached consensus definition of customer co-production, therefore this concept are often misused or mixused in some studies. All of these will hinder the development of customer co-production theory to some extent. This study proposed an integrated definition of customer co-production based on generalizing the extant definitions. In terms of this integrated definition this study divides customer co-production into three sub-dimensions as: information communication, cooperation, adaptive adjustment, and the according measurement scales are developed. The customer co-production dimensional model is verified by the dates from the questionnaires which distributed in knowledge-intensive business enterprises in China. Comparing to the single dimension model, this Multidimensional model can be more comprehensive and can be more accurate to reveal the dynamic process of customer co-production.