Innovation is widely recognized as one main contributor to a firm's competitiveness. To conduct innovation, an organization must utilize its tangible and intangibles resources. The current study is aimed at examining the effect of intangible resources, namely human, organizational and relational resources on innovation in the context of service firms (i.e., tutoring agencies) in Indonesia. In addition, the role of absorptive capacity as a moderating variable is also tested. Based on the survey among tutoring agencies in Indonesia, the findings show that intangible resources have a significant impact on innovation. Moreover, the absorptive capacity plays a significant role as a moderating between the relational resources and innovation. The study provides a better understanding on the existing debate and literature on a firm's resources and innovation especially within service firms.