LAUSR

Abstract Service innovation is essential, particularly for companies operating in highly competitive environments, as it can lead to innovation adoption behaviors, which in turn influence overall business performance. Drawing upon the innovation adoption and relationship marketing literature, and grounded within the structure-conduct-performance paradigm and social exchange theory, this study examines the reputational and relational mechanisms through which service innovation influences the innovation adoption decisions of small and medium-sized enterprises (SMEs). A survey of 336 Australian SME representatives reveals the critical role of suppliers’ sustainable competitive advantage (SCA) and affective commitment in mediating the relationship between service innovation and innovation adoption behavior. However, industry-relevant moderators in the form of technological turbulence and long-term orientation constrain the mediating effects. Specifically, perceived SCA has stronger mediating effects among short-term-oriented customers, whereas affective commitment has stronger mediating effects when technological turbulence is low. The findings provide useful insights for organizations in terms of capitalizing on their reputation and relationship with customers to encourage the adoption of innovation by SMEs.