Innovation in industrial business-to-business (B2B)services is becoming increasingly important forcompanies that want to compete and grow in a globalizedmarket. Innovation in services is a process of creating newand novel services as well as improving existing serviceswith respect to content, delivery and quality. However, inthe existing service agreements, the innovation processmay be influenced by the contractual agreement betweenthe service provider and receiver. Based on the case studyin the Norwegian oil and gas industry, the paper identifiesthe needs for innovation and various types of contracts inuse as well as discusses the influence of contracts oninnovation. The paper suggests that contracts shouldencourage and support innovation through variouscompensation mechanisms and contractual clauses inorder to allow growth and increased competitiveness.