Appropriability, services and reputation

The appropriability regime (Teece 1986) that innovating service firms face is generally weaker than what firms in manufacturing sectors face. An important means to appropriate benefits from innovation that service firms can use is their reputation. This conceptual paper offers insights into how a firm's reputation helps in appropriating value from innovation. Depending on the nature of a service, different kinds of third parties come into play in establishing reputation. In helping firms establish a reputation, such third parties influence customer decisions to acquire a service. While 'to produce a service is to organise a solution to a problem', and thus does not involve a third party, is true for pure services in particular, for a service firm to benefit from innovation such others are involved.