Customers are a knowledge resource outside of the firm that can be utilized for new service success by involving them in the design process. However existing research on the impact of customer involvement (CI) is inconclusive. Knowledge about customers' needs and on how best to serve these needs (articulated in the service concept) is best obtained from customers themselves. However co-design runs the risk of losing control of the service concept. This research argues that of the processes of external knowledge acquisition (via CI), customer knowledge assimilation and concept transformation form a capability that enables the firm to exploit customer knowledge in the form of a successful new service. Data from a survey of 126 new service projects show that the impact of CI on new service success is fully mediated by customer knowledge assimilation (the deep understanding of customers' latent needs) and concept transformation

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