Information technology (IT) is increasingly applied to develop new services, being a crucial role in innovation. Using IT has many benefits such as enhanced work efficiency and increased productivity. However, as IT is becoming a commodity, most companies cannot create a unique advantage through using IT alone. More importantly, some characteristics of IT (e.g., automation, standardization) may restrict creativity in innovation processes. Therefore, a disputed issue for researchers and practitioners is whether IT is a stepping stone or a stumbling block in developing innovative services. To illuminate whether IT matters or not in service innovation, this study divides IT resources into two parts: operand resources (i.e. IT infrastructure and human IT resource) and operant resources (i.e. process of utilizing IT to develop innovative services), to examine IT’s dual roles in service innovation. Our study proposes that innovation-oriented HR system is a key role which enables firms to transform IT operand resources to operant resources. Using a sample of 245 firms in service industry to test our model, we found that (1) IT’s role as operand resource indeed cannot directly affect innovation outcome, but IT’s role as operant resource can. (2) Through innovation-oriented HR system, firms can convert IT operand resources to IT operant resources. The results provide managerial insights that IT is still necessary and important in service innovation, but companies need an innovation-oriented HR system to trigger employees within and outside IT department to effectively use IT in service innovation processes, though which, firms receive competitive advantage.

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