ABSTRACT

Services and 'Systems of Innovation'

CRIC Discussion Paper No. 58

Dr Bruce Tether & Professor J Stan Metcalfe

This paper provides an overview of findings and conceptual arguments with respect to services, and innovation in services, especially from a 'systems of innovation' perspective. We argue that the great diversity of service activities is not reflected in the depth of understanding of innovation in services. The study of services brings to the fore the inter-relationships between business models, organisational forms, technology and outputs. Studies of services also highlight the significance of knowledge forms other than, or complementary to, technological knowledge (and R&D). In particular, the significance of market knowledge and procedural knowledge is highlighted. Many services show high degrees of interaction and interdependency between the service provider and the service user, as well as between provider and equipment suppliers, and there are important connections between service innovation and artefact innovations developed by manufacturers. Such interaction and interdependency is a central feature of all true 'systems of innovation' and, as in manufacturing, the diversity of activities within services means there is certainly no single 'system of innovation'. Instead, we argue there are multiple 'systems', but 'sectors' or 'sub-sectors', as these are conventionally defined, do not bound the systems of innovation. Instead, the systems of innovation often develop around identifiable sequences of problems (or opportunities), such that the problem sequence at the heart of the 'system of innovation' becomes the focusing device around which the system is developed. As the problem (or opportunity) changes, or is redefined, so the system can change, changing the agents involved and the relations between these agents. One important implication of this view is that firms can take a leading role in assembling innovation systems in the pursuit of their own competitive advantage. Innovation systems at this level are to a substantial degree transient; they evolve as the problems of the moment evolve. From this perspective, systems of innovation involve a wide range of agents from many different 'sectors' (often including both manufacturers and service providers). An interesting feature of these systems is that the agents involved (and the inter-relationships between these agents) can change over time, thus the boundaries of the system are not fixed, but are dynamic, and evolve.

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