Value Creation, Dynamic Capabilities and Slack Resources in Service Firms

Abstract

This study explores the antecedents of value creation in service firms. Specifically, whilst prior research has acknowledged the critical role of dynamic capabilities, little is known about the roles of different orders of dynamic capabilities and how they affect value creation. Building on the hierarchy perspective of dynamic capabilities, and through a review of voluminous but recent literature we establish service exploration as a higher order dynamic capability and service exploitation as a lower order dynamic capability and investigate their relationship with value creation. Moreover, given the importance of financial resource slack and human resource slack in service firms, and in the development of dynamic capabilities, we explore their relationship with service exploration and service exploitation. Using data from 61 New Zealand based service firms, we test our theoretical model. The results show that human resource slack enhances service exploration but does not enhance service exploitation, and service exploration does not enhance value creation directly but does so via service exploitation.