Effectuation, SME service innovation, and business customers’ value perception

Despite extensive research focus on the role of resource integration and combination in service innovation, the influence of decision-making logic has not been scrutinized. This study aims to examine the influence of effectuation, a distinct control-oriented decision-making logic, on small and medium-sized enterprises' (SMEs) service innovation. Based on a survey of Chinese manufacturing SMEs, the findings show that effectuation has an inverted U-shaped relationship with incremental service innovation but a linear positive relationship with radical service innovation. Moreover, environmental uncertainty reinforces the relationship of effectuation with incremental and radical service innovation. Finally, the relationship with business customers' value perception is positive for incremental service innovation but inverted U-shaped for radical service innovation. The findings offer unique insights into the importance of effectuation for SMEs' service innovation in uncertain environments, as well as for customers' value perception in the business market.