Innovation in Services: Issues at Stake and Trends

Background/Rationale and Policy Context

The service sector has a dominant role in the developed economies, accounting for about two thirds of employment and GDP. Moreover, services are the only sector of the European and North American economies that are generating jobs. Services therefore not only comprise a large part of the economy, but also represent the main engine for growth within advanced industrial economies. Despite this, very little is known about the underlying dynamics and nature of the service sector compared with other sectors, such as manufacturing, mining and agriculture.

Services have long been perceived as being non-innovative or technologically backward. Until the 1990s, they were largely perceived as passive adopters of technologies developed by manufacturers. In the 21st century, it is clear that this view is, at best, an oversimplification. Services are certainly major users of technologies, not least information and communication technologies, but they often use these in creative rather than standard ways, and their needs for new technologies is a major stimulus to innovation by manufacturers and computer software creators. Even as users of technologies, services are often innovators.

The "Innovation in Services" project, funded by the European Commission through the Innovation Unit of Directorate General (DG) for Enterprise, seeks to address some of these questions and in particular analyse the role of innovation in services and how this differs from that in manufacturing. A major goal in the study is to provide policy guidance and to suggest new avenues for change within businesses, as well as to improve our understanding of the service sector, particularly in relation to innovation.

The project focuses on some particular sectors rather than all service sectors. Four types have therefore been selected:

Services engaged in the physical transformation of goods - i.e., services that act on goods. A good example is road transport, handling and storage (including logistics).
Services which are aimed at the transformation of people - i.e., services which act on people, providing physical and/or mental/emotional changes. A good example is care for the elderly.
Services engaged in the transformation of information - i.e., services that are engaged in information processing. Data processing services are a good example here.
Services engaged in the provision of knowledge based services - i.e., services for which knowledge based 'services' are their principal product. Examples include design and related services.

The sectors selected seek to represent the range and diversity of the different types of transformation process involved in services. The advantage of this approach has been, in addition, to allow the study to investigate whether the issues (associated with, for example, skills, training, information technology), stimulating or hindering innovation, were the same or different across different type of service sectors.

The project involves a large-scale survey of service businesses across the member states of the European Union, together with the United States of America (USA) and Canada. The research team includes: INFESI, Université des Sciences et Technologies de Lille (France), The Fraunhofer Institute for Systems & Innovation Research, Kalsruhe (Germany), CESPRI, Universita' Bocconi (Italy); Canada-U.S. Trade Centre, State University of New York at Buffalo (USA) and CRIC, University of Manchester (UK) as project coordinator.

Contact:

Bruce Tether or Elvira Uyarra
ESRC Centre for Research on Innovation & Competition (CRIC)
The University of Manchester
Harold Hankins Building,
Booth Street West,
Manchester
M13 9QH

Email: Bruce.Tether@man.ac.uk or Elvira.Uyarra@man.ac.uk

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