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Purpose

This research examines the effect of dynamic service innovation capabilities on dual innovation (exploit or explore) and estimates its impact on firm performance.

Design/methodology/approach

We adopted a cross-sectional research design and collected n = 535 responses from budget hotels. The pre-validated scale was adopted. Also, we employed SEM, path and predictive analysis on the SmartPLS 3.3.2 package.

Findings

The research findings indicated that information communication technology (ICT) usage significantly impacts dynamic service innovation capabilities (DSICs). The mediating path of ICT usage via DSICs on firm performance (FP) is fully mediated. Whereas the innovation duality (exploitative and explorative) path partially mediates the relationship between DSICs and PF relationships in the hospitality firm context.

Research limitations/implications

The study was focused only on a particular geographic area and budget-friendly hospitality firms. The cross-sectional design of this study prevents establishing a causal relationship among the tested variables.

Practical implications

The current research emphasises that hospitality firms boost performance through the lenses of ICT usage, DSICs and dual innovations. Also, highlighted how ICT usage, DSICs and explorative and exploitative innovation are interrelated to calculate FP.

Originality/value

This study is one of its kind that examined the lower-order and higher-order latent variables of ICT usage and DSICs and found them reliable and valid. The mediation of innovation duality (explorative and exploitative) between DSICs and firm performance found a significant effect on the relation, according to the empirical result.

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