This paper focuses on how to improve process innovation in service sectors. To do so, we analyse how the interplay of external knowledge sources (specifically, the intensity of end-user collaboration and the breadth of external collaboration) and the firm’s internal resources impact process innovation at the firm level. Survey data from 166 Information Technology Services firms provide the empirical data, which is tested using the partial least squares structural equation model. Our results demonstrate that benefits from collaboration are not automatic, as the firm's commitment of internal resources fully mediates the impact of the intensity of end-user collaboration and breadth of external collaboration on process innovation. Thus, internal resources become critical to make effective use of the knowledge residing both internally and externally, and key managerial practices that enable a firm to extract benefits from external collaboration are identified.
end-user collaboration, external knowledge sources, internal resources, process innovation,