Examining service firms' brand strategies : identifying the relationships between service innovation, organisation resources and capabilities in achieving new service performance

In the increasingly competitive service industry, service innovation is an important driver of a service firm's success and survival. While service innovation has often been couched in the notion of new service development, there exists a lack of clarity regarding the extent that a service firm introduces a service innovation to the market through service branding. Achieving superior new service performance is a challenging task for managers, as they need to formulate an appropriate brand strategy that supports the pursuit of new service development, as well as deploy distinctive operational resources and capabilities to successfully implement brand strategy. Without the proper deployment of resources and capabilities, the translation of brand strategies into the superior new service performance-outcomes can be lost. The primary objective of this study is to explore the role of brand strategies (i.e. new brand strategy and brand extension strategy) in the relationships between service innovations, market knowledge, market orientation, branding capability and new service performance. Specifically, this study focuses on the extent that service firms achieve higher new service performance when they deploy an appropriate service innovation (exploratory vs. exploitative service innovation) regarding their brand strategy type. The current study seeks to offer four important contributions to the current literature. First, it will contribute to the literature by arguing that exploratory and exploitative service innovations are driven by specific market knowledge dimensions (market knowledge depth and breadth), regarding the type of brand strategy (new brand strategy vs. brand extension strategy). This study shows that brand strategies moderate the relationship between market knowledge dimensions and service innovations. Second, this study contributes to the literature by arguing that market orientation helps service firms to acquire and develop an appropriate market knowledge dimension regarding their brand strategy. It will show that brand strategies affect the relationship between market orientation and market knowledge depth and breadth. Third, this study contributes to the literature by arguing that users of both brand strategies benefit from applying the branding capability to increase new service performance. Fourth, this study contributes to the literature by arguing that service innovations, specifically exploratory and exploitative service innovations, affect new service performance regarding the brand strategy type. It shows that brand strategy moderates the relationship between exploratory and exploitative service innovation and new service performance. In addition, this study contributes more generally to the literature by examining the interaction role of service innovations, market knowledge, market orientation, branding capability and brand strategies in the service context of Australia as a developed economy. Given the growing importance of the service industry in Australia, scant attention has been paid to the role of service branding in the service industry. Therefore, understanding the role of service branding in new service development in the service industry and extending the theory to new context is worthy of investigation. Overall, the findings of this study reveal that service firms using new brand strategy need greater exploratory service innovation than exploitative service innovation to achieve higher new service performance. In addition, new brand strategy users need greater market knowledge breadth than market knowledge depth to deploy exploratory service innovation. Furthermore, brand extension strategy users need greater market knowledge depth than market knowledge breadth to deploy exploitative service innovation. The findings of this study are contributing to the service branding literature, providing a fuller understanding of the extent to which service firms formulating new brand strategy or brand extension strategy need to understand and invest in appropriate service innovation, market knowledge dimensions, market orientation and branding capability in order to optimise the implementation of their brand strategy.