Radical service innovation capabilities and competences and its performance measurement in the Egyptian banking sector

Established service firms acknowledge that successful radical innovations are critical to create substantial customer value by satisfying unmet needs, enhance long-term growth and the flows of idiosyncratic asset stocks that create sustainable competitive advantage. Despite these invaluable advantages, the failure rate of these costly and complex innovation initiatives is high and incremental innovation and imitation behaviour dominates most service industries, especially the financial service industry. Given the importance of services and the low performance records of these projects, it was expected that radical service innovation would be considered as a high research priority. Unfortunately, it was not the case. The central objective of the current research project is to develop a multi-layer (dynamic or evolutionary) conceptual framework for the key capabilities and competences of radical innovation success in the context of the Egyptian banking sector. An analytical, multi-layer conceptual framework was proposed before approaching the empirical study to guide the process of data collection and analysis. This conceptual framework elaborated on the major principles of the competence-based view of the firm. A (retrospective) longitudinal, multi-method, qualitative case study research was designed. Three data collection techniques were used: interviews; documents, and observations. A common framework of data analysis was employed: process narrative strategy; and synthetic strategy. The findings show that key to the success of radical service innovation is a complex set of capabilities and competences. These are: entrepreneurial (resource building) capability, theoretical (second-order) construct; core radical innovation competence, superordinate (third-order) construct; incubation capability, theoretical (third-order) construct; and acceleration capability, theoretical (third order) construct. Moreover, the success/performance of radical innovation is assessed through four categories of constructs. The first category is temporary competitive advantage (TCA), which may be: effectiveness advantage; or efficiency advantage. The second category is sustainable competitive advantage (SCA). The third category is a set of imitation barriers. The fourth category is the superior long-term financial performance. The findings show that the entrepreneurial (resource building) capability is causally linked to the core radical innovation competence, which is causally linked to both the incubation and acceleration capabilities. The findings also show that the incubation capability is causally linked to acceleration capability. The acceleration capability, on the other hand, is causally linked to TCA. The findings also show that the TCA-SCA relationship is contingent, and moderated by imitation barriers. Moreover, the SCA is causally linked to the superior long-term financial performance. Finally, the superior long-term financial performance is causally linked to core radical innovation competence. The current research project contributes to several streams of the literature in four main ways. First, it develops a process model for a radical service innovation project, from its inception to introduction. This model is developed based on a radical innovation at the national level: the National Program for Vehicle Replacement (NPVR), which is seen as success story in a developing country. Several national and international banks have played key roles in the incubation and acceleration phases of this program. Second, it delivers a set of original theoretical constructs (manifested by a consistent and comprehensive set of 72 first-order latent factors), and the propositions linking these theoretical constructs. Third, it identifies 13 criticisms for one of the most widely adopted theory within the (entrepreneurship, innovation, and strategic management) literature, the resource-based view (RBV) of the firm. Finally, it reinforces one of the least employed research methodologies, longitudinal qualitative research based on process data.