Investigating antecedents of service innovation in the bank industry: evidence from Jordan
Authors:   , Alzu'bi Mousa Yousef Mousa 
Published: November 2023

In today's highly competitive marketplaces, innovation is generally seen as one of the major factors influencing a firm's long-term success. Service innovation represents an additional means by which firms can improve their market performance and efficiency, which in turn may contribute to competitive advantage in today’s business environment. Market orientation, technology orientation and learning orientation are suggested collectively to be key drivers influencing service innovation and firm performance. However, very little research has been done so far to examine in one single model the impact of these three strategic orientations on service innovation and firm performance. Additionally, while many studies have examined transformational leadership as having a moderating impact between different variables, there is a lack of studies that have examined the impact of transformational leadership as a moderator between market orientation, technology orientation and learning orientation on service innovation towards improving firm performance in banking industry. Therefore, this study aims to examine the impact of the three orientations on service innovation and firm performance and the moderating impact of transformational leadership between the three orientations and service innovation. After identifying and reviewing the relevant literature in depth, the contingency theory was used to develop the conceptual model and associated hypotheses. This study employed a quantitative research design where 199 questionnaires were collected from bank managers in the first-second-third lines operating in Jordanian banks, to obtain necessary data to test the hypotheses developed for the study. Hierarchical regression analysis and Structural Equation Modelling through SPSS and AMOS were performed to analyse the research data. The main findings indicate that market, technology and learning orientations have a direct and positive impact on service innovation. Moreover, transformational leadership is found to moderate the relationship between market and learning orientation and service innovation. However, transformational leadership evidently has no moderating impact on the relationship between technology orientation and service innovation. Finally, service innovation is found to have a positive and direct impact on banks’ financial and non-financial performance. The current study contributes to the current literature at different levels. First, at the theoretical level, this study develops a conceptual framework which crosses different streams of literature, mainly market orientation, technology orientation, learning orientation, transformational leadership, service innovation and firm performance. Unlike previous studies, the model: (i) examines the direct impact of market, technology and learning on service innovation and offers a view of how service innovation can improve firm performance (financially and nonfinancially); (ii) examines the moderating impact of transformational leadership. Previous research has focused primarily on one or a few dimensions of strategic orientations. None of the previous studies, including those conducted in banks, combined the three orientations and transformational leadership in a single study to understand the effects on service innovation and, consequently, firm performance. Second, at the empirical level, this study is conducted in the Jordanian banking industry. As such this study is one of the very few studies to use empirical data from the study context to examine and report how different orientations and transformational leadership can impact service innovation and in turn improve firm performance. No previous literature has been found that has studied this orientation in the banking industry in the Middle East and in particular in Jordan; moreover, no studies have been found that integrated these kinds of orientations into one single model to improve firm performance.