Customer involvement not only has significant direct positive impact on the effect of New Service Development (NSD), but also has significant indirect impact on NSD through absorptive capability. On the one hand, when the market demand is greater, the competitive intensity will strengthen the positive impact of customer involvement on NSD, but the moderating effect of demand uncertainty is not significant. On the other hand, when the market demand is weaker, demand uncertainty will strengthen the positive impact of customer involvement on NSD, but the moderating effect of competitive intensity is not significant. These findings provide important managerial implications for managing customer involvement and improving absorptive capability in NSD. In addition, firms should focus on the differentiation of competitors under high market demand, or pay more attention to the changing of customer demand under low market demand, in order to promote the effect of NSD.