The impact of service innovation on business performance: Evidence from firm-level data in Chinese tourism sector

This study examines the impact of service innovation on business performance in service firms in China. Based on RBV and innovation theories, we construct an integrative model which links service innovation, service quality and business performance together. 277 valid samples were gathered through survey questionnaire in China's tourism sector and structural equation modeling (SEM) approach was employed. The findings are as follows. First, service innovation would affect firm performance through direct and indirect paths in which service quality plays a positive mediating role. Second, the direct impact of innovation on performance is larger than that of indirect one. Third, the innovation mode adopted by China's tourism firms is a type of cost-reduction one which focuses on eliminating firms' internal cost of operation. Our findings provide a number of valuable insights for managers.