Does enterprise software matter for service innovation? Standardization versus customization

This paper analyzes the relationship between service innovation and different types of enterprise software systems, i.e. standardized enterprise software designed to fit one certain business sector and enterprise software specifically customized for a single firm. Using recent firm-level data of a survey among information and communication technology service providers as well as knowledge-intensive service providers in Germany, this is the first paper which empirically analyzes whether the use of sector specific or customized enterprise software triggers innovation. The results based on a knowledge production function suggest that customized enterprise software is related to the occurrence of service innovation. However, there is no relationship between sector specific enterprise software and innovation activity. The results stay robust to several different specifications and suggest that the causality runs from customized software usage to service innovation.