The effect of service innovation on

customer behavioral intention in the

Taiwanese insurance sector: the role
of word of mouth and corporate
social responsibility
Jui-I Chang and Chen-Ying Lee

Abstract Jui-I Chang is based at the

Purpose – Service innovation has been one of the essential elements to meet the customers’ Department of Insurance
requirements, but few studies discuss service innovation regarding behavioral intention in the insurance and Finance, National
industry. This paper aims to investigate the effects of service innovation on customer behavioral intention Taichung University of
and examines the role of word-of-mouth (WOM) and corporate social responsibility (CSR). Science and Technology,
Design/methodology/approach – This paper used a survey to assess consumer behavioral intention Taichung, Taiwan.
regarding service innovation activities from life insurance. Questionnaires were administered to Chen-Ying Lee is based at
consumers who have purchased life insurance in Taiwan and the survey questions were tested through the Department of Risk
factor analysis. An analysis of multiple and hierarchical regression was performed to test the hypotheses.
Management and
Findings – The empirical results demonstrate that life insurance service innovation has a significantly Insurance, Shih Chien
positive influence on WOM and behavioral intention. Additionally, WOM has a partially mediating effect University, Taipei, Taiwan.
between service innovation and behavioral intention. Furthermore, the study indicates that CSR has a
moderating effect on the relationship between service innovation and behavioral intentions.
Originality/value – Considering the uniqueness of this study in the context of Taiwan, the research
draws on signaling theory as the framework to explore service innovation and the impact of social
responsibility on consumer behavioral intentions in the Taiwanese insurance industry. Additionally, the
results can be considered a service marketing strategy and are applicable to the financial service
industry in some developing Asian countries
Keywords Service innovation, Customer behavioural intention, Corporate social responsibility,
Word of mouth, Life insurance
Paper type Research paper

1. Introduction
Service has become an extremely important issue in the global economy. In many
developed countries, more than 70 per cent of gross domestic product (GDP) is dependent
on services (Moritz, 2005). Vargo and Lusch (2008) suggest that service-dominant logic
(SDL) has become more important in service science. The insurance industry is closely
connected to services. Particularly, the insurance industry has emphasized service,
relationships, interactions, customer’s behavior and co-creating value with customers. From
an SDL perspective, customers are value co-creators leading to a specific application and
Received 5 June 2018
development of customer competences. These competencies and specialized customer Revised 29 June 2019
skills then enable companies to adopt the role of the customer in the value creation Accepted 27 August 2019

DOI 10.1108/JABS-06-2018-0168 VOL. 14 NO. 3 2020, pp. 341-360, © Emerald Publishing Limited, ISSN 1558-7894 j JOURNAL OF ASIA BUSINESS STUDIES j PAGE 341
 process. Potential changes in the role of the customer can affect the way in which services
are purchased, used and paid for (Michel et al., 2008).
The Taiwanese insurance industry has experienced continued vigorous growth.
According to Swiss Reinsurance Company (2017) statistics, Taiwan’s insurance
penetration (i.e. the ratio of insurance premiums to GDP) ranked second in the world in
2016, at 19.99 percent. Compared with the UK (10.16 per cent) and the USA (7.31 per
cent), Taiwan’s insurance penetration is high. Life insurance is a professional service that
is characterized by high consumer involvement due to the importance of tailoring
products to specific needs, the variability of the products available, the complexity
involved in the policies and processes, and ultimately, the need to involve the consumer
in every aspect of the transaction. Furthermore, life insurance also faces new challenges,
such as diversification of service competition, co-marketing of financial holdings, and
competition in financial technology trends. Increasingly intensive competition results in
low margins for insurers and more disloyal customers, ultimately leading to higher
customer acquisition and retention costs. Trapped between eroding prices and higher
costs, insurance companies experience significant profit squeezes. In such a situation,
the literature usually recommends the innovation of new insurance services (Haller, 2000;
Maas and Graf, 2008). Insurers aim at maintaining and advancing their competitiveness
through value-added services (Haller, 2000). On the other hand, they also wish to use
value-added services to influence customer behavior regarding insurance services.
The ability to modify customer behavior structure is beneficial for achieving competitive
advantages and creating differentiation opportunities (Payne et al., 2008). Therefore,
service innovation is a significant factor in maintaining a firm’s competitive advantage in
an increasingly service-centered economy (Chen et al., 2016).
Service innovation can be changed through technology, organizational structure, market
behavior or the addition of new services (Gallouj, 2002). This innovation in services offered
by the business is an endeavor to reduce the gap between the needs and expectations of
consumers. Service innovation combines the knowledge of customers and frontline staff
and has strong impacts on sales (Melton and Hartline, 2010). Awan and Zahra (2014) find
that innovation plays a key role in changing consumer behavior and the growth of innovative
firms. Mahmoud et al. (2018) also suggest that a new service concept or process has a
positive and significant relationship with customer satisfaction. Furthermore, in financial
services, Nekrep (2013) suggests that insurers have initiated three main types of innovation
including market innovation (entry into market segments new to the company), product
innovation (new insurance service and its development) and process innovation (improved
internal capabilities). Through an initial study of service innovation in the financial service
context, YuSheng and Ibrahim (2019) reveal that service innovation has a direct influence
on service delivery and customer satisfaction. Due to the expected increase in financial
innovation in the future, breaking the traditional marketing channels and related financial
products, and the changing behavior and demands of consumers, service innovation is
increasingly important to the life insurance industry. Service innovations are becoming the
main tool of competition in the market, which provides an opportunity to add value to
insurance companies.
In addition, word-of-mouth (WOM) is considered the most important information source in
consumers’ purchasing decisions (Jalilvand and Samiei, 2012) and will have an impact on
customer behavioral intention. However, in life insurance, the longer customers remain with
a company, the less likely they are to submit claims (Peppers and Rogers, 2004).
According to Lombardi (2005), retaining customers is crucial for life insurers as a long-
lasting relationship with customers results in greater instances of cross-selling and positive
recommendation intentions. Therefore, the customer’s behavioral intentions may affect the
life insurance company’s operating results. Insurers consider customer behavioral
intentions as the most important determinant of service marketing and economic success.

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In recent years, corporate social responsibility (CSR) has gradually come to be regarded as
a good strategic marketing tool (He and Lai, 2014). This claim is supported by research that
highlights that CSR activities have a positive relationship with the firm’s reputation
(Verschoor, 2005). Expanding on this argument, companies could use CSR activities as a
signaling mechanism of their ethical behavior to enhance their reputation (Kim et al., 2010).
Recently, recognition of community wants has become one of the CSRs that companies
should pay attention to (Hao et al., 2018). Thus, life insurers also can actively participate in
CSR initiatives to solve the community wants and enhance the company’s reputation.
Moreover, CSR initiatives have been viewed as necessary for the life insurance industry
because companies protect the rights of policyholders and respect the benefits of
stakeholders. In addition, many studies have investigated CSR and its impact on consumer/
customer behaviors (Fatma and Rahman, 2016; Mohr and Webb, 2005; Marin and Ruiz,
2007). In this sense, strategic management research has asserted that CSR can provide
opportunities for service innovation and that CSR practices can lead to innovation through
the use of social, environmental or sustainability drivers to create new ways of working, new
products, services, processes and new market space. Therefore, social responsibility will
likely affect the behavior of service innovation to consumers.
Previous studies have focused on the manufacturing industry (e.g. product and process
innovation); few theoretical and empirical works have linked with the financial services
industry. This study aims to investigate the impact of service innovation on customer
behavioral intentions and examines the moderating role of CSR and WOM in the relationship
between service innovation and customer behavioral intentions. The contribution of this
research to the literature is threefold. First, as previous research on service innovation has
rarely explored its impact on consumers’ behavior in the financial industry, this study will
provide signaling theory as a framework to explore the effects of service innovation on
consumers’ behavior. Second, this study confirms that WOM has a partial mediating effect
on service innovation and behavioral intention. Furthermore, this study also reveals that CSR
has a moderating effect on service innovation and consumers’ behavior. Finally, it is worth
noting that most studies on service innovation have been conducted in developed countries
based on European and US data. Therefore, as a developing country, a sample from
Taiwan could be helpful in demonstrating service innovation and behavioral intention
outcomes in the context of emerging markets.

2. Literature review and theory

2.1 Signaling theory
Signaling theory provides a useful framework to explain the impact of innovativeness on
consumer perceptions (Pappu and Quester, 2016). According to signaling theory, the
marketplace is characterized by information asymmetry or imperfect information (Spence,
2002; Stigler, 1961). That is, unlike the firm, consumers do not have all the necessary
information required to judge the quality of an offering (Stiglitz, 2000). Firms, therefore,
attempt to convey information about the quality and value of their innovations to the market
using signals. To facilitate the effective exchange or purchase, signaling theory offers a
framework for a sender to convey information, especially hidden or limited information, to
the receiver (Mavlanova et al., 2016; Wells et al., 2011). Briefly, signals may reflect the
object-related situation that can be manipulated by the sender (Mavlanova et al., 2016;
Spence, 1973), which plays an important role in guiding the receiver’s cognitive
perceptions, decision-making and behavioral intention (Wells et al., 2011). Researchers
generally agree that innovativeness constitutes one of the signals consumers perceive from
a firm. Innovativeness may serve as a signal for expected utility (Stock, 2011), additional
advantages over existing alternatives (Mukherjee and Hoyer, 2001), and a firm’s capability
to perform promised tasks effectively (Kunz et al., 2011). Recent research has argued that a
brand’s innovativeness can act as a signal (Henard and Dacin, 2010; Stock, 2011).

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 Consumers, therefore, rely on variables such as advertising (Kirmani, 1990), brand name
(Rao et al, 1999) and warranty (Boulding and Kirmani, 1993) as signals to infer the value of
these communicated innovations, to determine their behavioral intention. In addition,
management scholars also have used signaling theory to explain the potential benefits for
firms of adopting socially responsible practices (Montiel et al., 2012; Ramchander et al.,
2012). For example, Su et al. (2016) find that CSR practices may be a signal that reveals
additional information to relevant stakeholders, especially in emerging economies.
Therefore, this study will use signaling theory as the theoretical framework to combine the
impact of service innovation and CSR on consumer behavioral intentions.

2.2 Service innovation

The concept of service innovation was first proposed by Betz (1987), who suggests that
service innovation is different from both product and technology innovation. The degree of
service innovation ranges from totally new or discontinuous innovation to a service involving
a minor adaptation or improvement of an incremental nature (Griffin, 1997; Garcia and
Calantone, 2002). Service innovation is a unit integrated with a new concept, target,
strategy, innovation methods and patterns (Van der Aa and Elfring, 2002). Cox (2013)
suggested enterprises enhancing the product or service value to cope with customer needs
for diverse products and services as a form of service innovation. Gremyr et al. (2014)
argued that service innovation was essentially the new services offered by enterprises for
customers, that is, customers as a part of service innovation. Den Hertog (2000) presented
four dimensions of service innovation (novelty), namely, in service concept, client interface,
service delivery system and technology, with many service innovations involving some
combination of these (Miles, 2008). The global life insurance industry is facing huge
changes and the leading insurers are endeavoring to innovate their services capabilities to
compete with their rivals. Therefore, shifting consumer needs, changing regulatory
requirements and service competition are driving insurers to shift from the traditional ways
of doing business to new channels, business models, processes and technologies. Thus,
services are the engines of expansion in modern economies and service innovation is of
vital importance to life insurers.

2.3 Word-of-mouth
Engel et al. (2001) defined WOM as the means of conveying opinions, comments or
information among people regardless of marketing or commercial matters and it is
considered one of the most powerful forces in the market place (Bansal and Voyer, 2000).
This is because consumers prefer to rely on informal and personal communication sources
(e.g. other consumers) in making purchase decisions instead of on formal and
organizational sources such as advertising campaigns (Bansal and Voyer, 2000).
Consequently, WOM is considered the most important information source in consumers’
purchasing decisions (Jalilvand and Samiei, 2012) and behavioral intentions.

2.4 Corporate social responsibility

Traditional perspectives assert that corporations should provide quality services and
maximize stakeholder benefits to meet their social responsibility. Some authors (Craig, 2003;
Maignan and Ferrell, 2004) argue that companies should only be responsible to company
stakeholders, while others argue that companies should be responsible to society as a whole
(Brown and Dacin, 1997; Kotler and Lee, 2005). Ferrell et al. (2010) argued that corporations
must be responsible to their interested parties, including internal shareholders, the board of
trustees, operational teams and employees, external consumers, suppliers, channels,
partners, competitors, local communities and interest groups. Carroll (1999) delineated four
categories of social obligations that a responsible corporate citizen would seek to meet.

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These include economic, legal, ethical and philanthropic responsibilities. Economic
responsibilities include the obligation to satisfy consumers with products of good value, as
well as generating sufficient profits for investors. Legal responsibilities require firms to obey
laws and comply with regulations while fulfilling their economic obligations. Ethical
responsibilities refer to the kinds of behaviors and ethical norms that a business is expected
to follow even though these have not been codified into law. Finally, philanthropic
responsibilities encompass financial and non-financial contributions to particular causes for
the “betterment of society.” Many companies embrace CSR programs as a way to promote
socially responsible actions and policies and to effectively respond to stakeholder demands
(Maignan and Ferrell, 2004).

2.5 Customer behavioral intentions

Behavioral intention represents repurchase intentions, WOM, loyalty, complaining behavior
and price sensitivity (Zeithaml et al., 1996). In many studies, willingness to recommend and
repurchase intentions are used to measure behavioral intentions (Ozdemir and Hewett,
2010). The elements of behavioral intention used in this study included reusing the product
or service, WOM advertising and recommending to others.

3. Research model and hypotheses

3.1 The relationship between service innovation, word-of-mouth and customer
behavioral intention
Enterprises make efforts to implement service innovation that allows customers to
experience the new service, thereby improving the quality of service innovation and
attention to customer loyalty. Innovation has a significant effect on customer loyalty because
it influences factors such as customer expectation, perceived value, customer trust/
confidence and customer commitment (Yeap Ai Leen and Ramayah, 2011). Khoung and
Giang (2014) found that service innovations (marketing-focused innovation, process
innovation and price innovation) were positively correlated with guest’s intention to return.
Yeh (2015) argued that service innovation capabilities contribute to customer advocacy,
which can achieve superior relationship quality and customer loyalty. Yang et al. (2017)
argued that online shoppers’ perceived innovation has a positive influence on repurchase
intention. Therefore, this study suggests that service innovation can enhance the way of the
development of service delivery, which can naturally enhance consumers’ assessment of
behavioral intention. Based on the preceding discussion, the following hypothesis is
proposed:
H1. Service innovation affects behavioral intentions in life insurance companies.
WOM has become an important and influential source of information on consumer attitudes
and purchasing behavior. Andreassen and Streukens (2009) investigated electronic word-
of-mouth (e-WOM) as a potential source of information for service innovation. Mohtasham
et al. (2017) investigated the effect of service quality and innovation on WOM, they also
noted that service innovation factors influence customer loyalty. Ultimately, customer loyalty
is found to lead to WOM among customers. Therefore, the main focus of service innovation
is on increasing service efficiency to create a competitive advantage to meet customer
needs and satisfaction to enhance the effects of WOM. Based on the preceding discussion
the following hypothesis is proposed:
H2. Service innovation affects WOM in life insurance companies.

3.2 The mediating effects of word-of-mouth

Through service innovation, companies can create highly satisfied customers who are loyal to
the organization. This is beneficial to the organization as customers spread positive WOM, in

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 essence becoming a living advertisement for the firm. If there are many satisfied customers
spreading positive WOM communication, this will lower the cost of promotion to attract new
customers (Byerlee and Alex, 2002). WOM is widely regarded as one of the most influential
factors affecting consumer behavior (Daugherty and Hoffman, 2014). This influence is
especially important with intangible products that are difficult to evaluate prior to consumption,
such as tourism or insurance. Yeh (2016) suggested market orientation and service innovation
capabilities of supermarket retailers contributed to their customer advocacy to achieve
superior customer relationship quality. In addition, Alexandru (2010) conducted a study to
observe the impact of WOM on purchase intention. The results revealed that positive WOM
increased the purchase intention of customers and acted as publicity for the companies. Kwek
et al. (2010) conducted quantitative research using a sample of 242 respondents. Outcomes
showed that WOM had more positive effects on purchase intention than advertisements or
other media. Huang et al. (2007) confirmed the effects of WOM on purchase intention. The
study found that WOM had a powerful impact on the service industry. The current study,
therefore, proposes that the main effect of service innovation and behavioral intention is linked
through the WOM. Satisfied customers are more likely to recommend services to family and
friends and are less likely to switch. That is, service innovation enhances the chances of WOM
generation, which, in turn, increases the behavioral intentions of the customers for specific
services or vice versa. The following hypothesis is proposed:
H3. WOM mediates the relationship between service innovation and behavioral intention
in life insurance companies.

3.3 The moderating effect of corporate social responsibility

Strategic CSR also creates value via products and considers service innovation linked to
social issues (Burke and Logsdon, 1996). CSR initiatives may prove important for
corporations. According to Little (2006), these initiatives can lead to the implementation of
innovation processes that respond to social, environmental and economic needs by creating
new work methods, products, services, processes and markets in a context that could lead
numerous firms to redefine their strategies. MacGregor and Fontrodona (2008) underscore
that CSR-driven innovation is aimed at products and services that have some sort of social
purpose, while innovation-driven CSR may be more aligned with creating social processes
and is driven by value. UeÜbius et al. (2009) also suggest a connection between CSR and
innovation. Implemented innovations are successful in organizations in which CSR is
considered to have a positive influence on innovation. Aaker (1996) and Esch et al. (2006)
indicated that the fulfillment of CSR has a positive impact on consumers’ evaluation of
corporate activities, which, in turn, has a positive effect on the current purchasing behavior
and future purchase intentions of consumers. Sen and Bhattacharya (2001) proved that the
fulfillment level of CSR will directly affect the consumption behavior of consumers. In
addition, many studies have focused on CSR and its impact on consumer or customer
behavior (Fatma and Rahman, 2016; Marin and Ruiz, 2007). Therefore, this study argues that
the insurance business has the characteristics of social welfare and will have an impact on
behavioral intentions through service innovation combined with the implementation of CSR.
Based on the above literature and discussion, the following hypothesis is proposed:
H4. CSR has a moderating effect on the relationship between service innovation and
behavioral intention among life insurance companies.
Figure 1 illustrates the proposed relationships among service innovation, WOM, CSR and
behavioral intentions, serving as the framework of this study.

4. Methodology
As the objective of this study is relatively straightforward and structural equation modeling
(SEM) is unable to deal with collinear variables, multiple regression analysis was used to

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 Figure 1 Research framework

Word-Of–Mouth

H2 H3

Service innovation
H1
Service concept
Client interface Behavioral intention
Service delivery system
Technology options H4

Corporate social responsibility

Economic CSR, Legal CSR
Ethical CSR, Discretionary CSR

provide a diagnostic overview of the collinearity in this study. Therefore, SEM was not
considered for evaluating these complex relationships. Instead, following researchers such
as Yang et al. (2017), Mahmoud et al.(2016), Chomvilaiuk and Butcher (2014) and Weng
et al. (2012), multiple and hierarchical regression was used to explore the impact of service
innovation on customer behavioral intention and to examine the role of WOM and CSR.

4.1 Sample and data collection

This research uses purposive sampling to collect data using a questionnaire survey. The
research survey was conducted in Taipei, New Taipei and Taoyuan from January to March
2017; paper-based questionnaires were mainly distributed through life insurance broker
supervisors and staff to consumers who had previously purchased life insurance in Taiwan.
A pilot study with a small sample size of 30 was conducted to clarify the overall structure of
the questionnaire. In this pre-test, the reliability and validity of the questionnaire were tested
and the items were modified to fit this survey of switching behavior. Following the pilot test,
the main survey was administered through 480 questionnaires and 422 valid responses
were collected after eliminating irrecoverable and invalid responses; the valid
questionnaires account for an effective response rate of 77.7 per cent. In terms of
demographics, the majority of respondents were female (56.4 per cent) and younger than
30 years of age (46 per cent). In terms of educational level, the highest educational
attainment was primarily a university graduate (65.9 per cent). In the occupational
backgrounds, the other industry accounted for 35.3 per cent of the total sample. An
extrapolation procedure suggested by Armstrong and Overton (1977) assessed the non-
response bias of the data set. No significant differences were found between early (first
quartile) and late (fourth quartile) respondents with respect to the constructs used in this
study. Table I presents a demographic profile and sample descriptive statistics.

4.2 Questionnaire design and measures of constructs

The survey questionnaire consisted of two parts. The first recorded the subject’s
demographic information and the second recorded the subject’s perception of each
variable in the model. The demographic variables assessed were gender, age, level of
education and occupation. The second section asked each subject to indicate his or her

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 Table I Demographic profile and sample descriptive statistics
Item Demographics Frequency (%)

Gender Male 184 43.6

Female 238 56.4
Age 21-30 years 191 46.0
31-40 years 96 22.1
41-50 years 81 19.2
Over 51 years 51 12.1
Education Under senior high school 13 3.1
Senior high school 85 20.1
College/University 278 65.9
Graduate school 56 10.9
Occupation Financial sector 84 19.9
High tech industry 32 7.6
Manufacturing industry 56 13.3
Service industry 101 23.9
Others 149 35.3
Total 422 100.0

degree of agreement with each item. The second section comprised four items, the first
being fifteen questions on the four service innovation constructs (Den Hertog, 2000; Cheng
et al., 2012); the second consisted of 12 questions on the four CSR constructs
(Carroll, 1999; Maignan and Ferrell, 2000); the third consisted of three questions on WOM
(Engel et al., 2001); and the fourth consisted of five questions on customer behavioral
intention (Ozdemir and Hewett, 2010). Data were collected using a seven-point Likert scale
to facilitate measurement. Participants were asked to complete the questionnaire and
indicate their current opinion on each variable item (1 = strong disagreement and 7 =
strong agreement). The questionnaire consisted of 35 items measuring the ten variables,
which are summarized in Table II.

Table II Definition of the key variables

Construct Operational definition Sources

Service concept An intangible conceptual element, which is novel in its Den Hertog (2000),
application to a particular market Cheng et al. (2012)
Client interface The design of the interface between the service provider and its Den Hertog (2000),
clients Cheng et al. (2012)
Service delivery The linkage between the service provider and its client. The Den Hertog (2000);
system delivery is indeed one specific type of interaction across the Cheng et al. (2012)
client interface (others including financial transactions, design Bilderbeek et al. (1998)
inputs, after sales, and so on)
Technology options Concerns the degree to which adopters themselves are in Den Hertog (2000),
practice shaping technological development Cheng et al. (2012)
Economic The obligations for business to maintain economic growth, and Carroll (1999), Maignan and Ferrell, (2000)
responsibility to meet consumption needs
Legal responsibility The businesses must fulfill their economic mission within the Carroll (1999), Maignan and Ferrell (2000)
framework of legal requirements
Ethical Require that businesses abide by moral rules defining Carroll (1999), Maignan and Ferrell (2000)
responsibility appropriate behaviors in society
Discretionary Those business activities that are not mandated, not required by Carroll (1999), Maignan and Ferrell (2000)
responsibility law, and not expected of businesses in an ethical sense
WOM The way of conveying opinions, comments or information among Engel et al. (2001)
people regardless of marketing or commercial matters
Behavioral intention The repurchase intentions, word of mouth, loyalty, complaining Ozdemir and Hewett (2010)
behavior and price sensitivity

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4.3 Reliability and validity analysis
The internal reliability analysis measures the consistency of item content in scales, and the
stability of scale measurements for dimensions. This study uses the value of Cronbach’s
alpha to verify the items’ consistency. The threshold value for an acceptable Cronbach’s
alpha is 0.7 (Nunnally, 1978). All the coefficient alpha values, ranging from 0.762 for WOM
to 0.912 for the service delivery system, were higher than the threshold value. Therefore,
good reliability of various subscales is ensured. The contents of the questionnaire are
based on relevant theories, refer to the related literature’s questionnaire contents, and
include scholars’ opinions. Thus, this study has a considerable degree of content validity.
Factor analysis is deemed appropriate in this study as the Kaiser–Mayer–Olkin measure
indicates excellent sampling adequacy (0.9) and Bartlett’s test of sphericity (p = 0.000) is
significant; the sample size is, therefore, adequate for the data. Factor analysis is performed
to assess construct validity and principal component analysis with a varimax rotation is
used. The results of the factor analysis indicate that the eigenvalue of each construct
exceeded 1, each item has significant factor loading greater than 0.5, and no item was
found to have cross-loading, showing strong convergent validity (Kaiser, 1958). The results
of the factor and reliability analysis are shown in Table III.
Based on this rule, ten dimensions were obtained: service concept, client interface, service
delivery system, technology options, economic, legal, ethical, discretionary CSR, WOM and
behavioral intention. In addition, Chiou (2006) suggested that cumulative explained
variance can measure validity; when it is higher than 60 per cent, the validity of the
construct is good. The cumulative explained variances of this study’s constructs are all

Table III Factor analysis and reliability

Cumulative percentage
Construct Item Factor loading of variance Cronbach’s a

Service concept SI2 0.793 25.353 0.907

SI3 0.796
SI4 0.777
SI7 0.522
Client interface SI5 0.734 48.303 0.784
SI6 0.589
Service delivery system SI8 0.752 69.184 0.903
SI9 0.751
SI10 0.634
Technology options SI 11 0.607 82.293 0.912
SI12 0.722
SI13 0.818
SI15 0.605
Economic responsibility CSR1 0.756 24.638 0.903
CSR3 0.768
Legal responsibility CSR4 0.845 49.140 0.855
CSR5 0.564
Ethical responsibility CSR6 0.824 71.191 0.863
CSR7 0.685
Discretionary responsibility CSR10 0.846 88.953 0.832
CSR12 0.827
WOM WOM1 0.931 87.258 0.762
WOM2 0.943
WOM3 0.928
Behavioral intention BI1 0.903 74.646 0.863
BI2 0.881
BI3 0.906
BI4 0.813
BI5 0.812

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 higher than 60 per cent. Hence, the dimensions have good construct validity. Table IV
presents the internal correlation, mean and standard deviations for all variables. The results
reveal that each variable has a significant correlation with all other variables.

4.3.1 Common method variance test. As with all self-reported data, there is a potential for
common method biases resulting from multiple sources, such as motif consistency and
social desirability. (Podsakoff et al., 2003). Therefore, the interview hiding method and the
item meaning concealment method were adopted in the questionnaire layout and design in
advance to reduce the deviation of questionnaire filling. Following Donate and Sánchez de
Pablo (2015); Fulltrton et al. (2014) and Chen and Huang (2009). We used a Harman one-
factor test (Podsakoff and Organ, 1986) is conducted on the crucial variables in this study’s
theoretical model, which include service innovation, CSR, WOM and behavior intentions.
The results of this test note that four factors are present and that the most covariance
explained by a single factor is 23.91 per cent, indicating that comment method biases are
not a problem in this study’s results.

5. Empirical analysis and results

5.1 Control variables
As previous studies have demonstrated, personal background factors (such as occupation)
have an impact on behavioral intentions (Pandy and Srivastava, 2016). Customers are
different ages, and service requirements are different, so age is included in the control
variables (Hennig-Thurau et al., 2002). To avoid the interference of exogenous variables,
this study incorporates demographic variables as control variables, including age and
occupation.

5.2 The relationship between service innovation and customer behavioral intention
As a higher variance inflation factor (VIF) value represents more significant collinearity of
variables, VIF value above 10 indicates serious collinearity (Gujarati, 1995). First, the VIF
values of all variables are less than five, indicating that there are no problems of collinearity
between variables. To verify H1, multiple regression model analysis is used to determine the
effect of corporate image on customer loyalty. The regression equation has a level of
significance (F = 61.021, p = 0.000) and the predictability (Adj R2) value is 0.462. These
results indicate service innovation positively affects behavioral intention, which confirms H1.
Results indicate that the service concept ( b = 0.462, p = 0.000) significantly and positively
affects behavioral intention. However, client interface ( b = 0.055, p = 0.425), service
delivery system ( b = 0.048, p = 0.516), and technology options ( b = 0.075, p = 0.323) have
no significant effect on behavioral intention. In addition, in the control variables, the
occupation has a significant impact and other control variables have no significant effect.
The results are summarized in Table V.

5.3 The relationship between service innovation and word-of-mouth

To verify H2, multiple regression models are used to determine the effect of service
innovation on WOM. The regression equation has a level of significance (F = 93.016, p =
0.000) and the model predictability (Adj R2) value is 0.568, indicating that service innovation
positively affects WOM. Service concept ( b = 0590, p = 0.000), client interface ( b =
0.207, p = 0.001), service delivery system ( b = 0.161, p = 0.016) and technology options
( b = 0.236, p = 0.000) significantly and positively affect WOM, which confirms H2. In
addition, the control variables have no significant effect. The results are summarized in
Table V.

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 Table IV Means, standards and construct correlation
Variables Mean SD 1 2 3 4 5 6 7 8 9 10

1 5.37 1.15 1 0.788 0.794 0.722 0.807 0.717 0.712 0.634 0.695 0.622
2 5.16 1.18 0.788 1 0.775 0.807 0.654 0.592 0605 0.578 0.603 0.547
3 5.17 1.19 0.794 0.775 1 0.842 0.721 0.647 0.635 0.597 0.635 0.527
4 5.10 1.24 0.772 0.807 0.842 1 0.669 0.608 0.617 0.561 0.624 0.532
5 5.42 1.21 0.807 0.654 0.721 0.669 1 0.814 0.791 0.680 0.719 0.603
6 5.54 1.09 0.717 0.592 0.647 0.698 0.814 1 0.762 0.590 0.656 0.572
7 5.44 1.17 0.712 0.605 0.635 0.617 0.791 0.762 1 0.682 0.693 0.594
8 5.27 1.19 0.634 0.578 0.597 0.561 0.680 0.590 0.682 1 0.679 0.600
9 5.06 1.24 0.695 0.603 0.635 0.624 0.719 0.656 0.693 0.679 1 0.798
10 4.86 1.21 0.622 0.547 0.527 0.532 0.603 0.572 0.594 0.600 0.798 1
Notes:  Significant at p < 0.05;  significant at p < 0.01 (two-tailed); 1: service concept; 2: client interface; 3: service delivery system; 4: technology options 5: economic
responsibility; 6: legal responsibility; 7: ethical responsibility discretionary; 8: responsibility; 9: WOM; 10: behavioral intention

VOL. 14 NO. 3 2020

j JOURNAL OF ASIA BUSINESS STUDIES j PAGE 351
 Table V The effect of service innovation on behavioral intention and WOM
Behavioral intention WOM
Variables b (p-value) B (p-value) VIF

Service concept 0.462 (0.000) 0.590 (0.000) 3.495

Client interface 0.055 (0.425) 0.207 (0.001) 3.699
Service delivery system 0.048 (0.516) 0.161 (0.016) 4.311
Technology options 0.075 (0.323) 0.236 (0.001) 4.428
Control variable
Age 0.024 (0.511) 0.024 (0.473) 1.042
Occupation 0.272 (0.000) 0.15 (0.643) 1.025
D-W value 1.656 1.725
F value 61.021 93.016
Adj R2 0.462 0.568
Notes:  Significant at p < 0.05;  significant at p < 0.01;  significant at p < 0.001

5.4 The mediating effect of word-of-mouth

This study uses Baron and Kenny’s (1986) mediating effect confirmation model to evaluate
whether customer satisfaction is the mediating variable between CSR and customer loyalty;
the following four conditions must be met:

1. CSR must have a significant influence on customer loyalty;

2. CSR must have a significant influence on customer satisfaction;

3. when CSR and customer satisfaction are simultaneous prediction variables in a

regression analysis on customer loyalty, customer satisfaction must have a significant
influence on customer loyalty; and
4. In the mediating variable model, the regression coefficient of CSR must be smaller than
the regression coefficient of the independent variable model.

First, this study explores whether service innovation affects behavioral intention through
WOM. As shown in Table VI, the results of Model 1 reveal there is a significant influence
between service innovation and behavioral intention ( b = 0.604, p < 0.001). In addition,
there is a significant influence between service innovation and WOM ( b = 0.694, p <
0.001). Furthermore the result of Model 2 shows that there is a significant influence between
WOM and behavioral intention, and there is a significant influence between service
innovation and behavioral intention ( b = 0.095, p < 0.01), but the b value is smaller than
0.604 from the first step, indicating that WOM has a partially mediating effect between
service innovation and behavioral intention. Thus, H3 is supported.

5.5 The moderating effect of corporate social responsibility on service innovation

and behavioral intention
H4 tests the moderating effect of CSR. This research follows Aiken and West (1991), who
used hierarchical regression to explore the moderating effect of CSR on the relationship

Table VI The mediating effect of WOM

Behavioral intention
Variables WOM Model 1 Model 2

Service innovation 0.694 0.604 0.095

WOM 0.731
Adj R2 0.480 0.363 0.639
F-value 390.311 240.421 372.845
Notes:  Significant at p < 0.05;  significant at p < 0.01;  significant at p < 0.001

PAGE 352 j JOURNAL OF ASIA BUSINESS STUDIES j VOL. 14 NO. 3 2020

between service innovation and behavioral intention. As shown in Table VII, the results of
Model 1 demonstrate that service innovation has a significant positive impact on behavioral
intention. Model 2 includes CSR, and the model predictability (Adj R2) value is 0.515. The F-
value is significant, and CSR was found to significantly affect behavioral intention. Model 3
illustrates the moderating effect of CSR on service innovation and behavioral intention to test
the aforementioned hypothesis. The results show that legal CSR ( b = 0.229, p < 0.05)
positively moderates the relationship between service innovation and behavioral intention.
However, the interaction items of other CSR have no significant effect on behavioral
intention. The overall model of (Adj R2 is 0.523, which is larger than the results of Model 2.
From the above results, it can be concluded that the life insurers’ CSR actions have partially
interfered with the service innovation and behavioral intentions of enterprises. Moreover,
CSR is found to have a moderating effect on the relationship between service innovation
and behavioral intention.

6. Conclusion and managerial implications

This study uses signaling theory as the framework to explore service innovation and the
impact of social responsibility on consumer behavioral intentions. Overall, the results
provide a more comprehensive theoretical and empirical foundation for understanding the
impacts of service innovation on behavioral intention and examining the role of WOM and
CSR in the life insurance industry.
First, life insurers’ service innovation positively affects behavioral intention. The results
are consistent with the findings of Yang et al. (2017). As a result, innovation can be
used as a signal of expected utility (Stock, 2011). Therefore, managers should
strengthen and apply their service innovation strategies to enhance the convenience
of customers purchasing life insurance products and improve the expected
effectiveness of such products to increase customers’ intention. Second, the results
demonstrate that in terms of service concept, client interface, service delivery system
and technology options, customers of service innovation administered by insurance
business operators will help to increase the WOM effect, which is consistent with the

Table VII The moderating effect of CSR on service innovation and behavioral intention
Model 1 Model 2 Model 3
Variables b value b value b value

Independent variable
Service innovation 0.583 0.230 0.234
Moderating variables
Economic CSR 0.104 0.090
Legal CSR 0.094 0.189
Ethical CSR 0.084 0.035
Discretionary CSR 0.238 0.214
Control variable
Age 0.017 0.757 0.039
Occupation 0.277 0,239 0.214
Economic CSR  Service innovation 0.092
Legal CSR  Service innovation 0.229
Ethical CSR  Service innovation 0.086
Discretionary CSR  Service innovation 0.032
D-W value 1.653 1.683 1.681
R2 0.441 0.523 0.536
Adj R2 0.437 0.515 0.523
F-value 109.703 64.808 42.909
Notes:  Significant at p < 0.05; 
significant at p < 0.01; 
significant at p <0.001; b value:
standardized coefficient

VOL. 14 NO. 3 2020 j JOURNAL OF ASIA BUSINESS STUDIES j PAGE 353

 findings of Mohtasham et al. (2017). Life insurers that practice service innovation have
to take customers’ WOM behavior into account. Third, this research proposes WOM as
a partial mediator in the relationship between service innovation and behavioral
intention. These results are consistent with the findings of Huang et al. (2007), who
propose, develop, and confirm the mediating role of WOM in the relationship between
service innovation and behavioral intention. Finally, the results also reveal that CSR
produces a significant moderating effect between service innovation and behavioral
intention, indicating that customer’s perceptions of high CSR and the ability of the
insurance service innovation will increase behavioral intention. Additionally, the
findings of this study provide an insight into the importance of CSR and WOM as
indicators of service innovation and behavioral intention, and of implementing long-
term service innovation strategies to enhance behavioral intention in the life insurance
industry.

6.1 Managerial implications

This study can be useful for practitioners to assess the potential long-run effect of
service innovation-related investments on behavioral intention. Furthermore, the results
have both theoretical and practical managerial implications in developing economies.
First, service innovation enhances behavioral intention, which, therefore, encourages
managers of life insurers to invest in service innovation activities. For example, life
insurers need to strengthen their customer interface, service delivery system and
technology options, which can enhance the communication between practitioners and
consumers and lead to an improve service innovation experience. This can be viewed
as a service marketing strategy that provides a business with the opportunity to
influence customers’ behavioral intentions. Second, for WOM to enhance the
relationship between service innovation and behavioral intention, managers of life
insurers may need to implement service innovation activities that are capable of
continually building WOM. If WOM can report customers’ voices effectively and
efficiently, this may help firms to manage the adoption process for new services more
effectively to enhance customers’ behavioral intention. Third, the results would provide
information on the moderating effect of CSR in the relationship between service
innovation and behavioral intention. Strategic management research has asserted that
CSR can provide opportunities for innovation and that CSR practices can lead to
innovation through the use of social, environmental, or sustainability drives to create
new ways of working, new products, services, processes, and new market space
(Gallego-Alvarez et al., 2011). With accelerated improvements in service standards and
expectations of stakeholders, enterprises need to undertake promising efforts to make
a real contribution to society (Hao et al., 2018). As a result, life insurers should focus on
internal CSR initiatives such as poverty alleviation through skills development, anti-
sexual harassment awareness activities in the workplace and assistance to low-income
workers. Furthermore, to achieve profit goals, they should also connect with the
community and environmental support and develop customer relationships to influence
consumers’ behavioral intentions. Finally, this empirical result also provides an
integrated framework and is applicable to the financial services industry in some
developing Asian counties.

7. Limitations and future research

This research has some limitations, which provide directions for future research. First, this
study tests the hypotheses using a purposive sample of life insurance consumers from
Taiwan. Future research should test this model with larger random samples in other
contexts. Second, other antecedents of service could be included in future studies, such as
service quality or customer service experience. Future studies should consider other

PAGE 354 j JOURNAL OF ASIA BUSINESS STUDIES j VOL. 14 NO. 3 2020

financial industries such as banking, securities, and other financial institutions. In addition,
service innovation can also be extended to financial technology and further study will
examine the impact of service innovation on corporate performance and sustainable
management.

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About the authors

Jui-I Chang (PhD) is an Assistant Professor of Insurance and Finance management at the
National Taichung University of Science and Technology in Taiwan. His current research
interests are in the area of risk management and insurance, corporate government, property
and liability insurance. He has been published several papers in insurance and business
management journals, such as Journal of Management and Business Research, etc.

VOL. 14 NO. 3 2020 j JOURNAL OF ASIA BUSINESS STUDIES j PAGE 359

 Chen-Ying Lee (PhD) is an Assistant Professor of Risk Management and Insurance at the
Shih Chien University in Taiwan. His current research interests are in the area of financial
management and insurance, business management and marketing. He has been
published several papers in insurance and business management journals, such as
Geneva papers on Risk and Insurance-Issues and Practice, Total Quality Management &
Business Excellence, Asian Economic and Financial Review, International Business
Research and Journal of Enterprise Information Management, Journal of Quality, Social
Responsibility Journal, etc. Chen-Ying Lee is the corresponding author and can be
contacted at: chenying0207@yahoo.com.tw

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