Title: Innovation and performance in the service industry: empirical evidence from South Korea

Authors: Namhoon Kim; Kyoung Ae Lee; Julie Kim

Addresses: Department of Food and Resource Economics, Pusan National University, 1268-50 Samnangjin-ro, Samnangjin-eup, Miryang-si, 50463, South Korea ' Department of Industry and Market Policies, Korea Development Institute, 263 Namsejong-ro, Sejong-si, 30149, South Korea ' Yonsei University, 311, Daewoo-hall, 50, Yonsei-ro, Seodaemun-gu, Seoul, Republic of Korea

Abstract: The purpose of this study is to empirically investigate the effect of innovation activities on the corporate performance of service firms examining how size influences their performance. We used quantile regression to estimate the correlation between firm innovation activities and performance in the service industry and determined whether firm size matters for innovation using the survey on innovation and structural change of the service industry (SISCS). Among various innovation activities, only organisational innovation was significantly correlated with increased sales for service firms. Moreover, the effect of organisational innovation was larger for smaller service firms, suggesting a negative relationship between corporate size and organisational innovation. Therefore, organisational innovation may be the key factor for small service firms to improve their performance.

Keywords: service industry; innovation; small sized firms; quantile regressions; firm behaviour.

DOI: 10.1504/IJSEM.2025.145060

International Journal of Services, Economics and Management, 2025 Vol.16 No.2, pp.148 - 168

Received: 17 Nov 2022
Accepted: 27 Aug 2023
Published online: 18 Mar 2025 *

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