The purpose of this article is to lay the foundations of a theory that
can be used to interpret innovation processes in the service sector.
The hypothesis underpinning this article is based on Lancaster's defin
ition of the product (in both manufacturing and services) as a set of
service characteristics [Lancaster, K.J., 1966. A New Approach to Cons
umer Theory. J. Political Economy 14, 133-156.]. The article follows t
he example of those who have sought to apply Lancaster's work to techn
ological phenomena. Various modes of innovation in the service sectors
are highlighted and illustrated. (C) 1997 Elsevier Science B.V.