The purpose of the article is to scrutinize how knowledge is managed in service innovation in the telecommunications industry. In the merger of two leading European telecommunications companies, the world's third largest ITC company was formed in 2007. This consortium has activities in more than 150 countries and is an example of a very large industrial service provider. Therefore, it is an interesting case company for our study. Design/methodology/approach - The article consists of a literature review and a case study on the technical support department of a global telecommunications company. We will discuss the concepts of service innovation, dimensions of innovation in the service industry and intellectual capital (IC) management via knowledge management in the service industry. The authors highlight that, like innovation, knowledge management also is suitable for IC management. Knowledge management is a management function that creates or locates knowledge, manages the flow of knowledge and ensures that knowledge is used effectively and efficiently for the long-term benefit of the organization (Darroch and McNaughton 2002; de Plessis 2007). In the empirical part of the paper, the results of the case observations and interviews at the company will be introduced. Originality/value - The methodology utilized here incorporates empirical evidence of the role and activities of the innovation function in managing knowledge and ideas from different sources for the development of both products and technical support services. Based on the research results, we also identify the dimensions of innovation used in the case organization. Practical implications - The outcomes of the case study suggest how managers can improve knowledge management in their service innovation function.