Innovation in Services - Department for Business, Innovation and Skills

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Innovation in Services In the meantime, European countries had begun to measure innovation directly, through what have become known as the European Community Innovation Surveys (CIS). The CIS, and the OECD’s Oslo Manual (1992) on which it is based, were originally motivated by the understanding that much innovation was being missed by measuring only R&D and patents (Smith, 2005). The CIS uses a ‘subject based’ approach (Archibugi and Pianta, 1996) – that is rather than focus on innovative things (as in the object based approach), firms were asked about various aspects of their innovative activities, including whether they have introduced new or significantly changed products or processes. The CIS, however, was originally developed to survey the innovative activities of manufacturers, and was designed around the traditional dichotomy of (technological) product and process innovation, with organisational innovation omitted. In almost all countries, the first CIS, which was carried out in 1992, was confined to manufacturing. Subsequently, the Oslo Manual and CIS were adapted to extend the surveying to services. This adaptation involved little effort to address the peculiarities of services, and instead merely accommodated services by replacing the word ‘product’ with the word ‘service’. The second CIS, which was carried out in 1997, included many private services, although not public services (Tether et al., 2001). Figure 2.1: Pavitt, Miozzo and Soete’s Taxonomies of Innovation and Technology Trajectories Technology Producing Technology Using Pavitt 1984 Science Based Specialist Suppliers Scale Intensive (Pavitt Includes Private Services) (Pavitt includes Private Services) Source: Adapted from Pavitt (1984) and Miozzo & Soete (2001) 28 Miozzo & Soete Science Based & Specialist Suppliers Scale Intensive: IT Networks Physical Networks Supplier Dominated Supplier Dominated e.g., Software, Technical Consultancy Technology Producing e.g., Telecoms, Transportation, Financial Services Technology Using e.g., Traditional Services like Restaurants & Health Education
Changing Understanding of Innovation in Services Evangelista (2000) exploited Italian innovation survey data and classified service firms into four groups, which resonate with the Pavitt and Miozzo-Soete taxonomies discussed above: ● Technology Users – are the least innovative group, and come closest to the archetype of services as being ‘supplier dominated’. These firms rely on technologies bought in from external sources, usually the manufacturing and/or information technology (IT) sectors. The types of activity within this group include (amongst other things) waste processing, land and sea transportation, security, cleaning, legal services, travel services and retail. ● Interactive Services. In these sectors, innovation is achieved through close interaction with clients, rather than through internal R&D or technological acquisition. A heavy reliance is placed on developing and/or implementing software and/or acquiring know-how. The activities in this classification include: advertising, banks, insurance, hotels and restaurants. ● Science and Technology Based Services. These firms are major generators of new technological knowledge, which they then diffuse to manufacturers and other service providers. Their innovation activities are typically located ‘upstream’ at the ‘front-end’ of the innovation and knowledge generation chain, often involving close interactions with public and private research institutions (Tether and Tajar, 2006a). The activities included here are R&D services, engineering, computer and software services. ● Technology Consultancy Services – these combine characteristics of the science and technology-based services and the interactive services. They carry out internal innovation activities but draw heavily on clients’ knowledge. While all services may be said to have some problem-solving activities of one sort or another, the technical consultants’ main function is the provision of solutions to meet the specific needs of their clients. Miozzo and Soete’s classification, and Evangelista’s empirical study, are useful in highlighting the diversity that exists in services, and showed that dismissing all services as supplier dominated was an important error. However, Evangelista’s study found that whilst this was an error, it was not a bad first approximation. Despite accounting for less than 5% of employment in services, the technologically intense ‘Science and Technology Based Services’ were found to account for 30% of all service firms’ expenditures on innovation, whilst the ‘Technology Users’ accounted for only a small share of innovation expenditures but 80% of all service firms and more than half of employment in the service sectors included in the analysis. 8 Evangelista’s work broadly supports the conceptual work of Miozzo and Soete, and argues that innovation in services broadly mirrors Pavitt’s conceptualisation of innovation in manufacturing. It also reflected Evangelista’s finding, elicited 8 Meanwhile, the ‘Interactive Services’ category accounted for around a quarter of employment in services, and technology consultancy services less than a fifth. 29
Page 1 and 2: DTI OCCASIONAL PAPER NO. 9 Innovati
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