The service sector is the biggest sector in all the major economies of the world. Competition is fierce and innovation in this sector is no less important than innovation in the manufacturing sector. This study attempts to identify a couple of key factors that can affect innovation performance in the service sector. Resource-based theory and dynamic capabilities theory are used in this study to unlock the intricate effects of market orientation, resource orientation and business model choice on new service performance. Based on the survey data provided by 235 firms in Taiwan, this study found that the interaction of market orientation and resource orientation exerts a significant impact on new service performance. The business model choice further complicates this cause-and-effect relationship.