Purpose – The purpose of the paper is to scrutinize how the personnel of industrial companies exploit customer knowledge in service innovation and development.

Design/methodology/approach – A literature review addresses knowledge management, absorptive capacity and knowledge exploitation. The explorative case study focuses on customer knowledge exploitation in the development of industrial services that support customers' business processes and play a strategic role to the customers in nine Finnish companies.

Originality/value – The paper puts in evidence of the factors influencing the absorptive capacity of individuals in industrial service firms.

Practical implications – By identifying absorptive capabilities of individual employees and factors affecting them, managers can improve their knowledge management and create and implement better knowledge strategies to achieve competitive advantage.

Keywords – Knowledge management, Absorptive capacity, Knowledge exploitation, Industrial service, Service innovation

Paper type – Academic Research Paper