The growing literature on management innovation has largely been focused on systems, structures and processes that support the production of goods rather than services. Yet, competing through services has become a phenomenon of growing concern for firms from virtually every sector of the economy, including manufacturing firms. Service innovation scholars have synthesized a set of organizational capabilities in the form of management techniques and processes used in service innovation management. Using these insights, we develop a framework that investigates how management innovation in services can contribute to performance by looking at its relationship with service innovation. By using dynamic capabilities theorizing, we hypothesize that the adoption of a set of specific management structures, systems, and processes facilitates service innovation and improves performance. We found support that management innovation in services is strongly associated with service innovation, which, in turn, fully mediates its relationship with firm performance.