As a significant contribution to a firm’s long-term success, innovation has burst as one of the most important determinants of organizational performance. The important role of innovation in the success of firms’ business has resulted in the emergence of an extensive research on this subject. However, in most of the past studies on the issue of innovation, the focus was on innovation in manufacturing firms and less attention has been paid to service firms. The objective of this study is to do research on service firms and tries to explore factors that make up innovation capability in service firms and examine the relationship between those factors and innovation performance. Five factors were identified, that is service innovativeness, market innovativeness, strategic innovativeness, process innovativeness and behavioral innovativeness. Through questionnaires distributed by hand, data was collected from hotels in Kuala Lumpur, Malaysia. A total of 57 applicable questionnaires were collected out of 60 questionnaires distributed, indicating a 95 % rate of return. Multiple regression and Pearson Correlation analysis was used to analyze the data. Data analysis revealed that service innovativeness, market innovativeness and behavioral innovativeness have a significant relationship with innovation performance in hotel industry. However, strategic innovativeness and process innovativeness were not found to have a significant relationship with innovation capability. The result is consistent with previous studies, which found that organization with higher innovativeness have better innovation performance.
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