New Service Development Competence and Performance: An Empirical Investigation in Retail Banking
Article first published online: 12 FEB 2009
© 2008 Production and Operations Management Society
Production and Operations Management
Volume 17, Issue 3, pages 267–284, May-June 2008
How to Cite
Menor, L. J. and Roth, A. V. (2008), New Service Development Competence and Performance: An Empirical Investigation in Retail Banking. Production and Operations Management, 17: 267–284. doi: 10.3401/poms.1080.0034
- Issue published online: 12 FEB 2009
- Article first published online: 12 FEB 2009
- Received: April 2005; Revised: January 2006; Accepted: January 2006 by Michael Pinedo.
- new service development;
- service operations management;
- structural equations modeling
What can service firms do to improve their ability to offer new services? In this paper we argue that new service development success results from building a competence in the management of service development resources and routines. We conceptualize new service development competence as a multidimensional, second-order latent construct that is represented by a system of four interrelated and complementary dimensions: (1) formalized new service development processes, (2) market acuity, (3) new service development strategy, and (4) information technology use and experience. We hypothesize that the growth of new service development competence is related to improved new service development performance. Using structural equations modeling, we analyze survey data from 166 retail banks and report three key empirical findings. First, we show that the four hypothesized dimensions are statistically significant in defining new service development competence. Second, contrary to conventional wisdom in new product development, we find that formalized processes play a lesser role in the success of new service development compared with the other three dimensions. Instead, market acuity—which captures the firm's ability to see the competitive environment clearly and to anticipate and respond to customers' evolving needs and wants—was the most important new service development competence indicator. Finally, we demonstrate the positive effect of new service development competence on new service development performance and show that new service development competence is also significantly related to business-level performance. Together, our empirical results suggest that complementary benefits arise from the adoption of a more holistic approach to the management of new service development at the program level.