Abstract:
This paper offers a critical review of relevant literature in the area of knowledge management and
service innovation and suggests why previous strategy models fail to explain the relationship between
knowledge resource and innovation in service firms and what the drivers of service innovation are. In
service businesses, the service offering is often referred to as ‘service packages’ or ‘customer
solutions,’ and relates to the process of customising product to meet customer-set specifications.
Innovation and added values in service firms seems to have a closer relationship with the combination
and recombination practices carried out by entities such as project teams particularly in matrix
management firms. It is suggested that the firm’s codified, rather than tacit, forms of knowledge –
particularly the firm-wide production systems – can lead to various types of (re)combination. Based
on the resource-based view of the firm, a study of production systems and resource recombination can
provide better insights about the linkage between innovation, added value, and knowledge resource in
the service industry.
