Innovation novelty and (commercial) performance in the service sector: A Canadian firm-level analysis Pierre Therrien a , David Doloreux b,n , Tyler Chamberlin b a Innovation Policy Branch, Industry Canada, 235 Queen St., Ottawa, Ontario, Canada K1A 0H5 b Telfer School of Management, 55 Laurier East, Ottawa, Ontario, Canada K1N 6N5 article info Available online 10 August 2011 Keywords: Innovation Commercialization Sales Performance Service industries Canada abstract The purpose of this paper is to investigate whether innovation novelty has an impact on the firms’ performance in selected service industries. The principal interest in this paper lies in incorporating two different dimensions of innovation radicalness – market-entry and originality of the innovation – to assess firms’ commercialization performance. The results show that to derive more sales from innovation, service firms need to enter the market early (world-first and to some extent, Canada-first) or to introduce new products with high level of novelty. Importance of early-entry (world-first) or novel content in commercialization performance differs by industries. & 2011 Elsevier Ltd. All rights reserved. 1. Introduction Novel innovations provide the visual manifestations of the role of innovation in economic and social life. They are the basis on which incremental innovations modify, adjust or otherwise improve products or services, and are almost certainly a signifi- cant reason why innovations, generally speaking, have come to be popularly accepted as the major driving force behind long-term economic growth. They are so intuitively important to economic life that Schumpeter (1934, 1939), who most regard as the modern-day father of innovation studies, focused a considerable amount of his seminal work on the role of novel innovations. But while important scholarly works have used descriptive accounts of radical innovations to argue for their importance to the fields of management (Utterback, 1994; Christensen, 1997; Leifer et al., 2000) and economics (Nelson and Winter, 1982), relatively few studies have used large scale quantitative data to explore the impact of radical innovation on firms’ performance. Part of this might be explained by the challenges of measuring radical innovations. Fundamentally, the partition between radical and incremental innovation is qualitative in nature, despite concerted efforts to make objective this demarcation (Schoenmakers and Duysters, 2010). As a field, innovation studies’ has spent a considerable amount of its’ collective energy over the past decade to expanding its’ vision to include observations and comprehension of the dynamics and impacts of innovations across the whole economy. This has especially involved extensive research into innovation within the services sectors. Much has been learned regarding the differences in the patterns of innovation between manufacturing and services industries (Doloreux et al., 2008; Camacho and Rodriguez, 2008; Mansury and Love, 2008; Miles, 2008; Oke, 2007; Cainelli et al., 2006; Freel, 2006; Tether, 2005; Evangelista and Savona, 2002). However, the issue of innovation novelty, or intensity as it is sometimes referred to, has been largely ignored in the service industries. This paper seeks to address this gap. The specific objective of this study is to investigate whether innovation intensity impacts the firm’s commercialization performance. The principal interest lies in incorporating two different dimensions of innovation intensity – market-entry and originality of the innovation – to assess the commercialization performance. It also provides information on the relationship between innovation and commercialization in the service sector, which has received limited coverage in the literature on the subject in comparison to the manufacturing sector. The empirical phase of the study was conducted using firm-level data from the 2003 Canadian Survey of Innovation, conducted by the Canadian national statistics agency Statistics Canada. The remainder of the paper is organized as followed: Section 2 presents the literature review, Section 3 presents the research method, introduces the Canadian Survey of Innovation, and describes the economic model used in the empirical analysis, Section 4 reports the results of the economic model assessing the link between commercialization performance and the type of product innovators in selected Canadian service firms, and Section 5 concludes by presenting a summary of the results and the implications of the results to managers and policy-makers. Contents lists available at ScienceDirect journal homepage: www.elsevier.com/locate/technovation Technovation 0166-4972/$ - see front matter & 2011 Elsevier Ltd. All rights reserved. doi:10.1016/j.technovation.2011.07.007 n Corresponding author. Tel.: þ1 613 562 5800x4730. E-mail addresses: therrien.pierre@ic.gc.ca (P. Therrien), Doloreux@telfer.uottawa.ca (D. Doloreux), chamberlin@telfer.uottawa.ca (T. Chamberlin). Technovation 31 (2011) 655–665