Human Capital In Service Innovation Strategy

The purpose of this research is to examine a driving force behind innovation - human capital – which we contend is useful in identifying and exploiting opportunities in both goods and services contexts. Traditional predictors of innovation, such as research and development and marketing expenditures, are based largely on physical goods literature and are not necessarily appropriate given the unique challenges inherent in services. Drawing on the literature related to human capital theory, this research proposes that investment in employees is an innovation predictor that embraces the nuances of bothgoods and services firms. Our results suggest that human capital investment is a stronger predictor of innovation than traditional physical goods based predictors across both goods and services contexts. For managers, the findings suggest that greater long-term investments in human capital lend themselves to greater innovation.