New service development competence in retail banking: Construct development and measurement validation

New service development (NSD) has emerged as an important area of research in service operations management. However, NSD empirical investigations have been hindered by the lack of psychometrically sound measurement items and scales. This paper reports a two-stage approach for the development and validation of new multi-item measurement scales reflecting a multidimensional construct called NSD competence. NSD competence reflects an organization's expertise in deploying resources and routines, usually in combination, to achieve a desired new service outcome. This competence is operationalized as a multidimensional construct reflected by five complementary dimensions: NSD process focus, market acuity, NSD strategy, NSD culture, and information technology experience. In the first stage of measure development, we analyse judgment-based, nominal-scaled data collected through an iterative item-sorting process to assess the tentative reliability and validity of the proposed measurement items. Our results demonstrate that a reduced set of measurement items have reasonable psychometric properties and, therefore, are useful inputs for multi-item measurement scale development. In the second stage of measurement development, we conduct a confirmatory factor analysis of the five NSD competence dimensions using survey data collected from a sample of retail bank key informants and confirm the unidimensionality, reliability, and validity of the proposed five multi-item scales. The NSD competence scales developed in this research may be used to advance scholarly understanding and theory in NSD. Further, these NSD scales may provide a useful diagnostic and benchmarking tool for managers seeking to assess and/or improve their firm's service innovation expertise. (c) 2006 Elsevier B.V. All rights reserved.