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Services form an important part of the economy today. Innovation for service firms is as important as for manufacturing, but the innovation process for service firms is comparatively little studied. In this paper, I review the literature there is on the innovation process for service firms, and make two suggestions for formalizing that process. The common thought that service firms do not innovate does not hold. Innovation is, however, often ad hoc for services, and it can therefore be difficult to measure firms' innovation efforts. These points are related to issues of appropriability of the benefits of innovation in services. The two issues primarily discussed in this paper — the possibilities of formalizing and appropriating in case of new service development — are central issues for service firms. It is here that this paper offers some contributions to the existing literature; it does not so much present an overview thereof. [ABSTRACT FROM AUTHOR]