Innovation in Services - Department for Business, Innovation and Skills

Innovation in Services
The main empirical evidence used to support the focus on new technologies is
R&D statistics and patents as measures of innovative activity. Since – with the
notable exceptions of telecommunications and computer software firms –
service firms have traditionally done very little R&D (due in part to their less
formalised approaches to innovation (Sundbo, 1997; Evangelista, 2000; Sundbo
and Gallouj, 2001; Gallouj, 2002; Tether, 2005)) and obtain few patents (European
Commission, 2004), they are generally considered marginal with respect to
innovation. It is notable here that in recent years banks and other financial
services have begun to record considerably greater expenditures on R&D. 6 The
extent to which this reflects a ‘real change’ in their commitment to and
organisation of innovation, and the extent to which it reflects a ‘re-labelling’ of
existing activities has yet to be made clear.
The development of ‘object-based’ approaches 7 to identifying and measuring
innovations only served to reinforce the understanding that services were
uninteresting with respect to the production of new technologies (Pavitt, 1984;
Pavitt, 1987; Pavitt et al., 1989). The object based approach is centred on
identifying innovative ‘things’ – such as new drugs, or new computer systems.
As services tend not to produce objects directly (although they may assist in
their development), the vast majority of the identified innovations were
attributed to manufacturers.
The late Keith Pavitt built his seminal taxonomy of innovative activities on one
such dataset of innovations, through which he identified four types of
technological activity, the first two of which – science based (e.g.,
pharmaceuticals, electronics) and specialist suppliers (e.g., instrumentation,
specialist machinery) – are producers of new technologies, whilst the third –
scale intensive producers (e.g., car manufacturing, bulk chemicals) – is both a
producer and a demanding user of new technologies, and the fourth – supplier
dominant – is seen as being passively dependent on the others for the supply of
new technologies. Pavitt’s original classification (Pavitt, 1984) identified services
as being ‘supplier dominated’ and therefore as uninteresting if the primary
concern is the production rather than the use of technologies.
Arguably, this ‘neglect’ perspective remains dominant to this day, and within
innovation studies research on innovation in services (and ‘low technology’
manufacturing) remains a relatively marginal (if growing) line of work, which
receives much less attention than ‘hot’ areas such as biotechnology or
nanotechnology despite accounting for a vastly greater share of the economy
than these ‘hot’ sectors.
6 See http://www.innovation.gov.uk/rd_scoreboard
7 See Archibugi and Pianta (1996, 455-456) for a more detailed discussion about ‘object’ versus ‘subject’ based
approaches to innovation.
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