8/6/2019 Journal of Operations Management

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Journal of Operations Management Volume 25, Issue 3, April 2007, Pages 643-660

Research in the operations management field that uses Porter's (1980) generic business-level

strategies has mainly focused on the manufacturing domain. Researchers have long argued that

the service sector is different from the manufacturing sector due to the uniqueness of servicecharacteristics (e.g., Sasser et al., 1978 and Roth et al., 1997). Further, in the servicemanagement literature, the effect of business strategy on process innovativeness, has not been

addressed. As our focus is on TSOs, we will extend the work of Devaraj et al. (2004) to this classof service industry.

Sawhney (1998) has suggested that many firms experience demands from customers that require

customized products and services that must cater to individual customer's preferences and tastes,leading to a differentiation based strategy. In service organizations, the essence of a

differentiation strategy will lie in creating services that are unique. For TSOs, a differentiationstrategy based on Porter (1980) must focus on providing a unique benefit and a unique

experience to the customer. This can be in the form of new services, brand image (e.g.,reputation), features (leading to a variety of services), technology, and other dimensions

(Fitzsimmons and Fitzsimmons, 2004).

Besides the above mentioned traditional dimensions related to differentiation strategy, we

include ³speed to market´ as a component of the differentiation strategy for TSOs. Thisaddition is based on the work of several researchers. Sawhney (1998) has suggested that speed to

market is an important consideration for firms following a differentiation strategy. Jacome etal. (2002) have empirically obtained a typical differentiation factor as per Porter (1980), as

well as another factor, which they called time based differentiation. They state that ³« a timevariable «, is integrated into the differentiation strategy, thus breaking tradition with the

classical concept of differentiation ´. Similarly, researchers have suggested that that firms whocompete based on time are likely to gain competitive advantage (Bower and Hout, 1988, Stalk,

1988, Stalk and Hout, 1990 and Yeoh, 1994).

Service firms have been able to achieve their differentiation objectives by introducing newservices, customizing a standard service, providing faster customer service, making the

intangible tangible to create brand identification, reducing perceived risk, giving attention to personnel training, and controlling quality. The first four elements involve willingness in the

organization to make innovations in service processes²i.e. process innovativeness. Theseinnovations can be driven by technology (Johnson et al., 2000). Therefore, we extend the

findings of Devaraj et al. (2004) and Ward and Duray (2000), to service industries and argue thatTSOs are likely to show a strong positive association between differentiation as a generic

 business strategy and process innovativeness as a functional level outcome (shown by path 1 inFig. 1). This leads to the following hypothesis: