Innovation and dynamic capabilities in a traditional service sector

<jats:sec><jats:title content-type="abstract-heading">Purpose</jats:title><jats:p>The purpose of this paper is to analyse the types and the nature of innovations developed by small companies in a traditional service sector, as well as the ways that innovations impact their strategic capabilities.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-heading">Design/methodology/approach</jats:title><jats:p>The paper provides evidence from three case studies captured through a number of interviews with senior managers within the companies. The paper adopted a comparative analysis, selecting two cases that have managed this process with great success and one showing evidently less success.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-heading">Findings</jats:title><jats:p>Organisational and process innovations are critical aspects of a dynamic strategy in small service companies. Although a successful innovation strategy does not require the development of technological systems and knowledge intensive services, it does necessitate their sophisticated usage. Innovation enables the firms to access new markets and the reconfiguration of strategic capabilities in the long term.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-heading">Research limitations/implications</jats:title><jats:p>The paper identifies the existence of strong linkages between organisational and process innovation and dynamic capabilities in the small companies in a traditional service sector. The research has used qualitative methods and a case study methodology. Further research (e.g. other service industries) and ideally statistical evidence are required to generalise these findings into the wider service sector.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-heading">Practical implications</jats:title><jats:p>This work calls for managers in small companies in a traditional service sector which wish to grow to pay more attention to their active involvement in organisational and process innovations and the sophisticated usage (or development) of knowledge intensive services.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-heading">Originality/value</jats:title><jats:p>The paper brings together a number of concepts from the innovation studies and the strategic management literature to investigate management practices and strategies of small companies in a traditional service sector, the tramp shipping sector.</jats:p></jats:sec>