This research aims to understand how strategic orientation can reduce co-destruction behavior and thus lead to better innovation capabilities and competitive advantage in higher education. This study explores the Service Dominant Logic and practice theory perspective, which understands it as a resource misintegration and misalignment of practices, respectively, and proposes an interactive value formation framework-based model that integrates both theoretical foundations. Research employs a quantitative empiric design in higher education context. 456 responses were obtained from professors and staff via online survey. Data analysis comprised a structural equation modeling estimated via partial least squares. The findings reveal a negative association between value orientation and value co-destruction behavior, encompassing both employee and student conduct. In addition, value co-destruction behavior is negatively related to the institution’s innovation capabilities and competitive advantage. Conversely, the results demonstrate a positive association between innovation capabilities and competitive advantage. The findings have implications for interactive value formation framework, by advancing on the knowledge over integration of resources within practices, explaining its relationship and outcomes in higher education context. The study contributes to reduce scarcity of quantitative research on value co-destruction, and to the development of an emerging strategic orientation focused on value.