ABSTRACT
According to J. Schumpeter innovation can be of different types. He mentions five: product innovation, production process innovation, innovation in organization, new market behaviour and new raw materials. In general terms, the innovation process within service firms is similar to that within manufacturing which has been studied for many years. The relation between customers and other external actors and involvement of those in the innovation process has been important in manufacturing. A dual model for understanding innovation activities and how they are organized in service firms has been proposed, wherein innovation activities occur from the top-down as well as from the bottom-up. Professional organizations have a different innovation tradition than the top-strategical ones. The innovation process in service firms may be understood from two theoretical positions. One is the resource and strategy based view of the firm. The other is the perspective of organizational learning.
