Both service innovation and customer engagement have received research attention in recent years, but the integration of the two research streams remain sparse. Prior studies (Jaakkola and Alexander, 2014; Ordanini and Parasuraman, 2011) have discussed the interrelationship between the two research streams through a service-dominant logic (SDL) lens and a service system perspective. SDL suggests that value is perceived and co-created by the beneficiary (customers) and all social and economic actors are resource integrators (Vargo and Lusch, 2016). A service system is a value creation configuration consisting of exchange parties (service firms and customers) and their networks (other institutions or stakeholders) that indirectly influence value co-creation (Edvardsson et al., 2011). It is also considered a dynamic configuration that bring people, technology and organizations together in creating and delivering value (Agarwal and Selen, 2011). Thus, service firms accordingly need to design resource integration mechanisms within the service system that support all actors to enhance service innovation (Edvardsson and Tronvoll, 2013). Customer engagement offers one alternate way that customers participate in a new service process beyond transactions to influence service organization outcomes such as loyalty. Loyalty is one of the intangible assets that underpin an organization’s competitive advantage (Cossío-Silva et al., 2016). In the context of service innovation, loyalty becomes even more critical, as prior studies have indicated that many new services do not succeed in the marketplace (Gourville, 2006). Different characteristics of service innovation (e.g. service concept newness and relative advantage) represent new ways that a service organization offers its value proposition. However, service innovation that is new and better than existing offers does not automatically guarantee its success. In some cases, service innovation characterized by newness and technological advancement can be associated with a certain level of anxiety and confusion among customers (Venkatesh, 2000). Thus, an interesting question is how a customer perceives, evaluates, as well as responds (behaves) towards this new service concept. In addition, service innovation (e.g. self-service technology) increasingly requires customer participation in the service production and delivery process. According to SDL, service innovation requires that customers are motivated to co-create value by learning and sharing knowledge with other actors (e.g. service employees and other customers) and that they integrate their resources with other actors by investing their specific operant and operand resources into brand interactions (Hollebeek et al., 2016). Kandampully (2002) identifies customer engagement as one of the building blocks of service innovation, as it contributes to the service organization’s ability to deliver elevated service offerings. Thus, understanding the customers’ perception of these key characteristics of service innovation, which promote customer engagement and brand loyalty, is critical to service organizations.