Services Innovation in Ireland - Options for ... - Europe INNOVA

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Executive Summary Ireland like many other developed economies is experiencing strong growth in the services sector. For example, the employment in services in Ireland increased by 58% in the decade to 2004 1 . This compares with growth in employment of 5.6% in the Irish manufacturing sector 2 . And while the number employed in manufacturing was 5.6% higher in 2004 than in 1995, manufacturing employment declined by 10% from 2000 to 2004. At the same time, service exports from Ireland increased by 95.7% from 2000 while services imports rose to over 52% of total Irish imports 3 . The significance of services to the Irish economy was recently underlined by Ireland’s share of global services exports reaching 2.2% of all global services exports in 2004 4 . In the context of the Irish economy’s 0.32% share of the world economy, this is a significant achievement 5 . There are signs however that productivity and innovation in services in Ireland lags behind manufacturing. In respect of innovation, the Community Innovation Survey reported by Forfás in 2002 indicates that the proportion of services firms that engaged in continuous research and development at 13% was only half of the proportion of manufacturing companies similarly engaged. In terms of productivity, a recent report indicates that productivity growth in services in Ireland in the decade to 2004 was only 9.1% compared to over 60% in manufacturing 6 . The recent and significant growth in services in Ireland therefore may be related to volume rather than to efficiency measures such as productivity and innovation. It must be recognised however that the statistical indicators used to measure productivity and particularly innovation are strongly affected by the historically dominant position of manufacturing in providing the performance indicators. The policy and supports that are in place for innovation in most countries, including Ireland, are also mostly informed by the experience of the manufacturing sector rather than services. As new models of economic activity emerge in a globalised market place, new thinking on services innovation is required if policy and supports favouring services innovation are to be matched to the new models. A recently published OECD global study of knowledge intensive business services innovation shows that only a few countries are focusing their attention on innovation in the services economy 7 . Consequently only a few countries have begun to consider policies and programmes for promoting services innovation. This means that Ireland cannot copy existing policies but needs to develop truly innovative policies. While, researchers have begun to address gaps in our understanding of services innovation, in Ireland, Forfás has initiated research to identify and develop innovative policy thinking on services innovation, including the Review of Product, Process and Services Innovation carried out in 2003 and the Services Innovation Scoping Study that followed in 2004. Both studies identified the need for better understanding of services innovation, including a new ‘vocabulary’ for discussion and debate on policy that matches the reality of innovation for services. Furthermore there is a need for a robust and validated set of innovation models that can be used to create new services innovation policy. 1 OECD. 2006. OECD Annual Labour Force Statistics OECD.Stat (online database) Referenced August 2006. 2 CSO.2006. Employment in Manufacturing by Year: Database Direct Referenced August 2006. Manufacturing classification NACE 15-37. 3 CSO. 2006. International. Balance of Payments: Database Direct Referenced August 2006. 4 WTO Trade Statistics 2005. 5 Forfás. 2006. ‘International Trade and Investment Report 2005’. 6 Tansey, P. 2005. ‘Productivity: Ireland’s Economic Imperative’. A study of Ireland’s productivity performance and implications for Ireland’s future economic success. Commissioned by Microsoft, Dublin. 7 OECD. 2006. ‘Innovation and Knowledge-Intensive Service activities’. ISBN 92-64-02273-2. 1
Objectives and the Methodology for the Study The objectives of the Study were set out in terms of reference: 1. To review and examine innovation in services in Ireland. 2. To identify the main barriers to and drivers of innovation in services. 3. To develop innovation policy and measures to stimulate innovation in services. Throughout the Study there was a concern to ensure that the global and international context for services should be considered and used as a benchmark to inform and validate the research and assist in forming Conclusions. An important point to note is that whereas the objectives set out in the terms of reference for the Study referred to "service sector innovation", it was quickly realised that since services are frequently provided by manufacturing companies or as part of the manufacturing process, the more inclusive term ‘services innovation’ would be more appropriate for this study and is employed throughout the report. The methodology used in the Study was developed in collaboration between the Study team assembled for the project, led by the consultants CM International, and the Steering Committee for the Study brought together by Forfás. The methodology was based on a combination of desk research, global services expert interviews and inputs, followed by an interview programme with policy makers and 30 Irish or Ireland-based companies operating in six sectors. The key dimensions of the methodological approach are set out in the diagram shown below. Concepts & parameters of services innovation Key Findings Global trends in services & services innovation Geographical concentrations of services & services innovation Innovation in Irish Services Interim report While the Community Innovation Survey (CIS) suggests that higher levels of innovation are found in manufacturing, compared to the services sector, services innovation in the Irish sectors studied does not necessarily follow traditional innovation metrics such as R&D. In fact, the case studies of leading Irish services companies show that service companies in Ireland are evolving and innovating on a constant basis. 2 Irish policy & supports for services innovation Services innovation in Irish case studies Analysis & recommendations
Page 1 and 2: Services Innovation in Ireland - Op
Page 4: Preface The services sector in Irel
Page 7 and 8: 6 Policy and Programme Conclusions
Page 12 and 13: The conceptual framework used in th
Page 14 and 15: A Rationale for Services Innovation
Page 16 and 17: Policy Environment Conclusions 1. A
Page 18 and 19: The above conclusions are designed
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Page 22 and 23: This report is structured in accord
Page 24 and 25: Rapidly developing technology has b
Page 26 and 27: Figure 2 Examples of Services Locat
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Page 34 and 35: 3 Global Sectors and Services Innov
Page 36 and 37: usiness models including not only i
Page 38 and 39: y the customer and supplier. The de
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Page 42 and 43: A culture of innovation in financia
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Page 46 and 47: the limited emergence of cross-bord
Page 48 and 49: 4 Current Position of Services Inno
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Page 54 and 55: Types Table 5 Services Innovations
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In the case of RFID technologies co
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attention. In the context of the ca
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5 Irish Policy Support for Services
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This report sets out an agenda for
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Figure 4 Enterprise Ireland Innovat
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Key agencies have responded to the
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6 Policy and Programme Conclusions
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6.1.2 Innovation in Irish Services
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6.3 A Policy Environment for Servic
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The promotion of a services innovat
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These activities should aim to fost
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In order to articulate how a servic
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Strand 4 An Innovative Services Inn
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Acknowledgement This Forfás study
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Annex 2 - Research Method Introduct
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A total of 29 company interviews we
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Transition to the Knowledge Economy
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It is probably in financial service
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2. Financial Services Financial ser
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Annex 5 - Global Sector Concentrati
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Sweden’s artists and performers w
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Services Innovation in London’s F
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experienced a fairly significant an
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files through various channels such
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Annex 6 - Indicators of Services In
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Indicators of Service Sector Innova
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Table R&D Engagement in Services an
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Table 11 is drawn from the most rec
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Annex 8 - Bibliography Berger, A.,
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Kuusisto, J. and Meyer, M. (2003)
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Forfás Publications 2006 Future Sk
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Forfás, Wilton Park House, Wilton
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