Non-technical Innovations Definition, Measurement & Policy Implications. The new service economy: growth and implications for service innovation
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1 Karlsruhe, October 2008 Non-technical Innovations Definition, Measurement & Policy Implications The new service economy: growth and implications for service innovation Professor of Economic Policy, University of Alcalá-Madrid Ex-President of RESER
2 Contents: What is the new service economy Macro dynamics in services: some empirical evidence New challenges for services and the role of service innovation Linkages between service innovation and organisational innovation Some horizons for services research and policy
3 The new service economy: What is really new? Beyond some new services, are we in a new service economy? Services traits which are not new Many services coming from an old tradition Services already integrated in goods and material support for services Services traits which are new New integration in any economic and social activity: more intensive and uniform use of services all over the world? New challenges? October 2008 Karlsruhe New room for innovation, organizational innovation?
4 Figure 1. Sectoral value added (% GDP), 2005 Macroeconomic dynamics in services: a non-stop structural change process? 100% 80% 60% 40% 20% 0% United States Euro area Australia World Japan Canada Latin America & Caribbean Korea, Rep. India Sub-Saharan Africa Middle East & North Africa China Note: for Australia last year with information available is 2003 Source: Based on World Development Indicators, World Bank. Agriculture Industry Services
5 Macroeconomic dynamics in services: a non-stop structural change process? Figure 2. Services value added (% of GDP) United States Canada Euro area World Japan Australia Latin America & Caribbean Korea, Rep. Middle East & North Africa Sub-Saharan Africa India Note: for Australia last year with information available is 2003 Source: Based on World Development Indicators, World Bank.
6 Macroeconomic dynamics in services: a non-stop structural change process? Figure 3. Employment in services and GDP per capita, 2005 GDP per capita PPP, 2005 (thousands of dollars) Luxembourg r = 0,7573, p = 0, Norway US Ireland IcelandSwitzerland G7 Austria Australia Canada Finland United Kingdom Japan France Italy OECD Spain New Zealand Greece Korea Czech Rep. Portugal Hungary Slovakia Poland Source: Based on OECD and GGCD National Accounts Statistics Share of employment in services, 2005 (%)
7 Macroeconomic dynamics in services: More uniform distribution of services? 4,5% Figure 4. Market services share 2005 and annual growth rate Market services ,5% 1,5% 1,0% LTU HUN LVA POL EU10 EST SVN FI SLK SW CZ PT SP AT MLT DE GR IT EU25 DK EU15 FR IRL BE JPN NL UK LX CY US Note: Market services includes wholesale and retail trade (G), hotels and restaurants (H), 61 (water transport), 62 (air transport), 63 (other supporting and auxiliary transport activities; activities of travel agencies), financial intermediation (J), real estate, renting and business activities (K). Source: Based on Euklems Database 0,0% 20% 24% 28% 32% 36% 40% 44% 48% 52% Market services 2005
8 Macroeconomic dynamics in services: More uniform distribution of services? Figure 5. Public services share 2005 and annual growth rate Public services % 2% 0% -1% JPN UK IRL SVN POL LTU CY EU10 LVA CZ EST PT SLK GR LX AT NL DK IT HUN FI MLT EU25 EU15 DE SP US FR BE -2% SW Note: Public services: public administration and compulsory social security (L). Source: Based on Euklems Database 2,0% 4,0% 6,0% 6,7% 8,0% 10,0% Public services 2005
9 Macroeconomic dynamics in services: More uniform distribution of KIBS? Figure 6. KIBS in EU regions Note: Public services: public administration and compulsory social security (L). Source: Based on Euklems Database
10 Macroeconomic dynamics in services: More uniform distribution of KIBS? Figure 7. Sigma convergence, EU25-US 0,06 0, ,04 0,03 0,02 0,01 0 Manufacturing Health & social work Real estate, renting & business activities Hotels & restaurants Trade Financial services Other business services KIBS Education Public services Inland transport Other community, social & personal services Water & Air Transport Post & telecommunications Note: Standard deviations in the participation of services sectors en total employment. KIBS includes computer and related activities (72), research and development (73) and Legal, technical and advertising (741t4). Other business services includes renting of machinery and equipment (71) and other business activities, nec (745t8) Source: Based on Euklems Database
11 Table 1. Beta convergence regression summary, EU-US EU + US EU EU EU EU b p b p b p b p Market services -0,062 0,004-0,038 0,047-0,101 0,015-0,078 0,000 Public services -0,299 0,001-0,078 0,655-0,773 0,000-0,549 0,002 Mix services -0,038 0,023-0,018 0,323-0,159 0,016-0,056 0,040 Manufacturing -0,101 0,013 0,169 0,031 0,160 0,043 0,140 0,003 Trade -0,184 0,000-0,137 0,123-0,505 0,023-0,392 0,002 Hotels & restaurants -0,092 0,672-0,179 0,358-0,350 0,013-0,325 0,005 Water & Air Transport -1,799 0,000-3,447 0,001-0,485 0,293-0,908 0,024 Financial services -0,110 0,642 0,286 0,156-0,279 0,682 0,033 0,888 Real estate, renting & business activities -0,340 0,000-0,199 0,080-0,395 0,120-0,207 0,029 KIBS -2,224 0,000-0,222 0,354-0,161 0,776-0,211 0,319 Other business services -3,068 0,000-0,715 0,031-0,772 0,296-0,510 0,068 Education -0,264 0,006-0,051 0,742-0,513 0,014-0,247 0,051 Health & social work -0,154 0,022-0,087 0,065-0,529 0,108-0,013 0,848 Other community, social & personal services -0,355 0,013 0,006 0,973-0,516 0,152-0,363 0,071 Inland transport -0,011 0,969-0,572 0,158-0,305 0,347-0,337 0,122 Post & telecommunications -0,311 0,425-0,645 0,479-2,306 0,011-1,719 0,008 Note: Marked figures are significant at p <, Source: based on EUKLEMS Database, March 2008
12 Macroeconomic dynamics in services: Consequences of services and organisational innovation at macro level? 5% Figure 8. Relationship between relative productivity growth and relative employment growth, EU15, Cross-sector comparison Source: Based on OECD and GGCD National Accounts Statistics. Labour relative productivity annual growth rate 4% 3% Agriculture 2% 1% 0% -1% -2% r 2 = 0,5284; r = -0,7269, p = 0,0009 Communications Second best Optimal Manufacturing Transport TOTAL Distr. trades Renting of mach. & equip. Financial serv. R&D Computer serv. P ublic serv. SPS Prof. serv. Business serv. Real estate Other business serv. Hotels & cat. -3% -4% -2% 0% 2% 4% 6% Employment relative annual growth rate
13 -0,2% LX r 2 = 0,4193; r = -0,6476, p = 0,0091 Figure 9. Relationship between relative productivity growth and employment share growth, EU15, Cross-country comparison Relative productivity annual growth rate in the service sector -0,4% -0,6% -0,8% -1,0% -1,2% -1,4% SW DK NL BE DE Second best FR EU 15 UK AT SP IT Optimal GR -1,6% FI PT -1,8% 0,6% 0,8% 1,0% 1,2% 1,4% 1,6% 1,8% Services employment share annual growth rate Source: Based on OECD and GGCD National Accounts Statistics.
14 How to assess the place and impacts of service innovation at macro level? Needs: Better definition of service innovation, service employment, service productivity, service quality, service price; the new knowledge, how to make it operational Identification of linkages between services innovation and service productivity, how to approach it? Service innovation at the roots of growth convergence, how to capture service endogenous growth?
15 New challenges for the service economy the performance dimension Globalisation and service offshoring Management of risk and uncertainty Role of services in manufacturing Service engineering and service formalization Competition and deregulation Role of ICT
16 New challenges for the service economy: the social dimension New skills requested Unemployment and social exclusion Sustainable development Ageing population Regional asymmetries Transformations in public services
17 New challenges for the service economy: the ways to face to Service innovation as a way to face all the challenges? What role? What assessment? Organizational innovation as a part of service innovation? Product and process innovation in services Organizational and non-tech innovation in services Organizational and non-tech innovation in non-services activities Marketing innovation
18 Service innovation (SI) and organizational innovation (OI) Common nature: intangible nature, interactive nature,. Unclear boundaries: what SI is or is not OI e.g, use of KIBS, Interface innovation, service formalization, service combination or fragmentation, ad hoc innovations Bilateral causality and synergies More services, more SI, more OI More OI, more SI, more services
19 Figure 9. Share of innovative firms by innovation typology 70% Manufacturing Total services Business services 60% 50% 40% 30% 20% 10% 0% Product Process Organizational Marketing Source: CIS4 database Note: Data refer to median values for the following 15 EU countries: Lithuania, Poland, Belgium, France, Czech Republic, Luxembourg, Norway, Hungary, Spain, Netherlands, Denmark, Slovakia, Portugal, Italy and Cyprus.
20 Figure 10. Share of innovative firms introducing organizational developments 1,0 DK MT 0,8 PT LU Services 0,6 NO CY FR BE ES IT HU NL LT PL CZ 0,4 RO SK 0,2 Source: CIS4 database 0,0 0,2 0,4 0,6 0,8 1,0 Industry
21 Figure 11. Share of innovative firms reporting highly important effects of organizational innovation 35% Manufacturing Total services Business services 30% 25% 20% 15% 10% 5% 0% Reduced time to respond Reduced costs per unit Improved quality of products Reduced rates of employee turnover Source: CIS4 database Note: Data refer to median values for the following 15 EU countries: Belgium, Bulgaria, Czech Republic, Denmark, Germany, Estonia, Greece, Spain, France, Italy, Cyprus, Lithuania, Luxembourg, Hungary, Malta, Netherlands, Portugal, Romania, Slovakia and Norway
22 Some horizons for the service & organizational innovation research Conceptual frameworks, measurement, Impact assessment Relationship SI and OI Understanding of SI and OI in a macro context Macro and micro, economic challenges and business challenges, bridges in between
23 New horizons for the service research Services are not just a sector any more: a dimension of the economy, of product, of work (co-creation), of life (experience) Need of ambitious agendas for services research. Multidisciplinary approaches needed. Service Science?
24 Thank you for your attention
25 New challenges for the policy makers No reason for the exclusion of services from current public policies Need to take the best from existing good practices: the case of Germany Need to assess the needs of different regions and countries Services innovation as a key pivotal dimension of most action
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