R&D AND INNOVATION IN SERVICES : KEY FINDINGS FROM THE QUANTITATIVE ANALYSIS STRAND
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1 R&D AND INNOVATION IN SERVICES : KEY FINDINGS FROM THE QUANTITATIVE ANALYSIS STRAND KNOWINNO-INNOSERV Project Final Conference Paris, 11 December 212
2 BACKGROUND AND PROJECT DESCRIPTION
3 contribute significantly to GDP growth Contribution of different sectors to real GDP growth (annualised), 2-211* % 6 Other Community, social, personal svcs Business sector services SVK (9) KOR (1) POL (8) EST (9) ISR (8) CZE (9) AUS (6) GRC (9) LUX (9) ISL (9) SVN (1) NZL (8) GBR (8) ESP (9) CAN (8) HUN (1) CHE (8) AUT MEX (9) FIN SWE (9) USA (9) NLD (1) NOR (9) BEL (9) FRA DEU (1) PRT (6) DNK (1) ITA (1) JPN (9) Source: OECD, STAN database, November 212. Note: * or most recent available year. Latest available year displayed in parenthesis when different from 211.
4 Concerns about productivity in services Growth in labour productivity by sector, annual percentage change * * Business sector services excl. real estate CZE SVN HUN SWE FIN AUT DEU NLD FRA PRT CAN NOR ESP DNK ITA -8 CZE SVN HUN SWE FIN AUT DEU NLD FRA PRT CAN NOR ESP DNK ITA Source: OECD Compendium of Productivity Indicators, 212. Notes: * or most recent available. Business sector services cover distributive trade, repair, accommodation, food and transport services; information and telecommunication; financial and insurance; professional, scientific and support activities; arts and entertainment and other repair services.
5 Project objectives Review existing data sources and indicators for R&D and innovation in services: assess strengths and weaknesses Provide new policy-relevant evidence on the nature of R&D and innovation in services Draw lessons for improving the R&D and innovation measurement framework
6 A distinctive methodological approach Use wide range of firm-level survey data to capture complexity of firms competitive strategies International coordination for cross-country comparisons: EU (CIS) and non-eu countries Exploit new data linking possibilities (e.g. patents and ORBIS) Adopt broader framework of analysis to explore the relation between innovation in service sectors and service innovation
7 A broader framework for service innovation Business sector services - KIS - other services Non-market services Innovation in services (1) Service innovation (2) -High-tech -Other manuf. Innovation in services (1) Business R&D in service sectors Innovation types: product (incl. services), process, organisational, marketing; and innovation activities in service sectors (from innovation surveys) IPR: patent applications by service firms Service innovation (2): Innovation survey data on product innovations (goods/services) IPRs: patents by technology classes (incl. services) and trademarks by product classes (incl. services)
8 R&D IN SERVICES
9 Compared with other economic indicators, the service sector typically accounts for a relatively small share of BERD 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Share of services / R&D services in BERD, 21 or latest available year as a % of BERD R&D services as a % of BERD RUS_MA ISR_MA EST_MA PRT_MA IRL_MA LUX_MA ISL_MA GRC_MA DNK_MA NZL_MA TUR_MA ZAF_MA CAN_MA AUS_MA NOR_MA ESP_MA CHL_MA SGP_MA BEL_MA CZE_MA POL_MA HUN_MA ROU_MA AUT_MA SVK_MA USA_MA MEX_MA NLD_MA ITA_MA GBR_PF SWE_MA FIN_MA FRA_PF CHE_MA SVN_MA DEU_MA JPN_MA KOR_MA CHN_MA TWN_MA Source: OECD, ANBERD database, 212. Note: MA correspond to R&D expenditure classified by main activity, and PF by product field.
10 While the structural shift to less R&D-intensive sectors reduces headline R&D intensity, R&D intensity within services is increasing Decomposition of R&D intensity changes Basis points, (or closest year available) yearly average Between-sector changes Within changes in non-service sectors Within changes in services Total changes FIN KOR AUT EST JPN SVN PRT DEU HUN CZE AUS ESP BEL CAN ITA MEX GRC NLD IRL POL FRA SWE NOR GBR Source: OECD calculations based on STAN and ANBERD, 212.
11 Innovation is broader than R&D, particularly in services Share of firms with internal R&D activities among product innovating firms, by broad sector, % FIN SVN DEU FRA SWE NLD BEL CZE NOR HUN EST AUT ESP PRT SVK IRL ITA AUS Source: OECD calculations based on European Commission, Eurostat, 28 Community Innovation Survey, microdata, 212 and national innovation surveys from Australia, Austria and Belgium Note: Weighted.
12 INNOVATION IN THE SERVICE SECTOR AND SERVICE INNOVATION ACROSS THE ECONOMY
13 Innovation rates in KIS are close to those in high-tech manufacturing Share of firms introducing product, process, organisational or marketing innovation by sector category, % High-tech manufacturing Knowledge-intensive services Other manufacturing Other services Source: OECD calculations based on CIS 28 microdata (Eurostat), 212 and national innovation surveys from Australia, Austria and Belgium. Note: Weighted
14 There are differences in the nature of innovation across broad sectors Share of innovative firms by sector and type of innovation, % Goods Marketing 2 1 Service High-tech manufacturing Other manufacturing Knowledge-intensive services Other services Organisational Process Source: OECD calculations based on CIS 28 microdata (Eurostat), 212 Notes: Weighted. EU-15 (CZE, DEU, ESP, EST, FIN, FRA, HUN, IRL, ITA, NLD, NOR, PRT, SVK, SVN, SWE).
15 Service innovation also takes place in manufacturing and tends to co-occur with goods innovation Share of product innovating firms that innovate in goods only, in service only or both in goods and in service, by broad sector and country, % 1 Goods only Goods and service Service only AUS AUT BEL CZE DEU ESP EST FIN FRA HUN IRL ITA NLD NOR PRT SVK SVN SWE Source: OECD calculations based on CIS 28 microdata (Eurostat), 212 and national innovation surveys from Australia, Austria and Belgium. Note: Weighted.
16 Some manufacturing sectors are among the most likely to introduce new services Sector relative likelihood of innovating by type of innovation, Food, beverages, tobacco Textiles, apparel, leather Other transport equipment Motor vehicles ICT services Scientific and technical services Finance and insurances Computer and electrical equipment Machinery and equipment Basic metals, metal production Coke, petroleum, chemicals Pharmaceuticals n.e.c. Transportation Wholesale, retail trade Wood, pulp, paper, publishing, printing Rubber and plastics Goods Service Product or process Organisational Marketing Source: OECD calculations based on CIS 28 microdata (Eurostat), 212 Notes: Weighted. EU-16 (CZE, DEU, ESP, EST, FIN, FRA, HUN, IRL, ITA, LUX, NLD, NOR, PRT, SVK, SVN, SWE). Marginal effect of sector on the probability of innovating, controlling for size, belonging to a group/to a multinational and country - baseline=food, beverage and tobacco. Sectors are ordered according to their relative likelihood of introducing service innovation.
17 SERVICE INNOVATION ROLE IN FIRMS INNOVATION STRATEGIES
18 Service innovation plays a central role in the innovation strategies of firms Multi-dimensional scaling of innovation types and activities, product/marketing promotion non-technological placement pricing external relations Service innovation uniformly co-occurs with multiple types of innovation external knowledge market introduction abandoned other activities design/packaging external R&D service logistic training business practices work responsibilities supporting activities process/organisation methods good ongoing capital product innovations process innovations ongoing or abandoned organisational innovations marketing innovations innovation expenditure technological internal R&D Source: OECD calculations based on CIS 28 microdata (Eurostat), 212 Notes : Unweighted. EU-16 (CZE, DEU, ESP, EST, FIN, FRA, HUN, IRL, ITA, LUX, NLD, NOR, PRT, SVK, SVN, SWE).
19 Service innovation is related to a wide range of objectives Relationship between innovation types and various innovation objectives, Increase range of goods or services Pdtgoods Pcs- 3 supporti 2.5 Pcs- 2 logistics Org-.5 busines Org- external Org- work respons Mktpricing Pdtservice Mktdesign Mktplacement Mktpromotion Pcsmethods Orgbusines Org- work responsi Pcssupporti 2 Pcslogistics Enter new markets Mktpricing Pdt- goods Mktpromotion Pdtservice Mktplacement Orgexternal Mktdesign Pcsmethods Orgexternal Pcssupporti 2 Pcslogistics Org- Increase market share busines Org- work responsi Pdt- goods 2.5 Mkt Pcsmethods design Pdtservice Mktplacement Mktpromotion Mktpricing Replace outdated products or processes Mktplacement Mktpromotion Pcslogistics Orgexternal Pdtservice Pdt- goods Mktpricing Pcsmethods Mktdesign Orgbusines Pcssupporti Org- work responsi Improve flexibility for producing goods or services Pdt- goods Mktplacement Mktpromotion Orgexternal Mktdesign Pcsmethods Mktpricing Orgbusines Pcssupporti Pcslogistics Org- work responsi Pdtservice Improve quality of goods or services Pcsmethods Org- 1.5 Pdt- goods external Mkt- 1 Orgplacement.5 busines Pcs- Pdt- supporti service Mktpricing Pcslogistics Mktpromotion Mktdesign Org- work responsi Source: OECD calculations based on CIS 28 microdata (Eurostat), 212 Notes: Unweighted. EU-16 (CZE, DEU, ESP, EST, FIN, FRA, HUN, IRL, ITA, LUX, NLD, NOR, PRT, SVK, SVN, SWE). Proportional odds ratios obtained from ordered logistic regressions performed on the level of importance (high, medium, low, not relevant) given by firms to different innovation objectives for product (goods or service) or process innovations activities, on the sample of innoactive firms (firms with product or process innovation, or ongoing/abandoned activities for product or process innovation).
20 THE OPENNESS OF INNOVATION IN SERVICES
21 When introducing new products or processes, firms in services are more likely to rely on external inputs for development Share of product and process innovating firms whose innovation was developed by or with others, by sector category, % High-tech manufacturing Product innovation Other manufacturing Process innovation Knowledge-intensive services Other services Source: OECD calculations based on CIS 28 microdata (Eurostat), 212 Note: Weighted. EU-14 (CZE, DEU, ESP, EST, FIN, FRA, HUN, ITA, NLD, NOR, PRT, SVK, SVN, SWE).
22 Firms in knowledge intensive services are the most likely to collaborate % 5 Firms collaborating on innovation, by sector category, Proportion among innovation active firms Knowledge-intensive services High-tech manufacturing Other services Other manufacturing Source: OECD calculations based on CIS 28 microdata (Eurostat), 212 Note: Weighted. EU-15 (CZE, DEU, ESP, EST, FIN, FRA, HUN, IRL, ITA, NLD, NOR, PRT, SVK, SVN, SWE). The term innovation active is used here to refer to firms with product or process innovation, or ongoing/abandoned activities for product or process innovation.
23 Differences in sectoral collaboration rates are driven by market-based relations Firms cooperating for innovation by type of cooperation partner, Proportion among innovation active firms % Other enterprises within group Suppliers of equipment, materials, components, or software Clients or customers Competitors or other enterprises in sector Consultants, commercial labs, or private R&D institutes Universities or other higher education institutions Government or public research institutes Source: OECD calculations based on CIS 28 microdata (Eurostat), 212 Note: Weighted. EU-16 (CZE, DEU, ESP, EST, FIN, FRA, HUN, IRL, ITA, LUX, NLD, NOR, PRT, SVK, SVN, SWE). The term innovation active is used here to refer to firms with product or process innovation, or ongoing/abandoned activities for product or process innovation.
24 IMPACTS OF SERVICE INNOVATION ON PERFORMANCE
25 Service innovation is positively related to firms performance Effect of different types of innovation on employment growth, All sample High-tech manufacturing Other manufacturing Knowledge-intensive services Other services Goods Process Service Organisational Marketing Source: OECD calculations based on CIS 28 microdata (Eurostat), 212 Note: Weighted. EU-16 (CZE, DEU, ESP, EST, FIN, FRA, HUN, IRL, ITA, LUX, NLD, NOR, PRT, SVK, SVN, SWE). Marginal effects obtained from OLS regressions performed on firms' employment growth rates between 26 and 28 controlling for size, country, and belonging to a domestic/multinational group. All innovation types are introduced jointly in the regression. White bars correspond to non-significant coefficients (at 5 % level).
26 Do service innovation activities also benefit competitors? Implied impacts of various types of innovation by other firms within same sector, All sample High-tech manufacturing Other manufacturing Knowledge-intensive services Other services -.3 Goods innovation spillovers Service innovation spillovers Product-process innovation spillovers Marketing innovation spillovers Organisational innovation spillovers Internal R&D activity spillovers Source: OECD calculations based on CIS 28 microdata (Eurostat), 212 Notes: Weighted. EU-16 (CZE, DEU, ESP, EST, FIN, FRA, HUN, IRL, ITA, LUX, NLD, NOR, PRT, SVK, SVN, SWE). The bars correspond to the marginal effects of spillovers on firms' likelihood to introduce the corresponding innovation type or to engage in the corresponding activity. Spillovers were calculated as the weighted average share of firms introducing the corresponding innovation type or engaging in the corresponding innovation activity among other firms in the same sector (NACE rev. 2 at 2 digit level). White bars correspond to nonsignificant coefficients (at 5 % level).
27 FORMS OF PROTECTION OF SERVICE-BASED INNOVATION
28 How do service firms protect their innovations? Share of firms using various intellectual property rights by sector category 16% Patents Designs Trademarks Copyright 14% 12% 1% 8% 6% 4% 2% % High-tech manufacturing Other manufacturing KIS Other services Source: OECD calculations based on CIS 26 microdata (Eurostat), 212 Note: Weighted. EU-1 (CZE, ESP, EST, GRC, HUN, IRL, LUX, NOR, PRT, SVK). The shares correspond respectively to firms that have applied for a patent, registered an industrial design, registered a trademark or claimed copyright during the three years 24 to 26.
29 Are patents relevant for services? Most patenting takes place outside the service sector % 1 Patenting activity by sector, as a % of patents filed by firms, at the EPO and USPTO, 27-9 Business sector services, excluding real estate High- and medium-high-technology manufactures Medium-low-technology manufactures Other sectors Source: OECD STI Scoreboard 211, based on the Worldwide Patent Statistical Database, EPO, April 211; and ORBIS Database, Bureau van Dijk Electronic Publishing, December 21; matched using algorithms in the Imalinker system developed for the OECD by IDENER, Seville, 211. Notes: The patent portfolio of firms refers to patents applied at the European Patent Office (EPO) and at the US Patent and Trademark Office (USPTO) between 27 and 29. Only countries with matching rates above 6% of patent filings over the period considered are shown.
30 Service trademarks are widely used, often in combination with goods Trademark applications designating goods and/or service classes by country, As a percentage of trade mark applications at the OHIM and USPTO % Goods only Goods and services Service only SVN ESP SVK CZE LUX EST FIN AUT GBR POL NOR EU27 NLD IRL HUN DEU USA BEL GRC OECD DNK RUS PRT SWE FRA IND CAN ISL BRA CHE ITA AUS NZL MEX TUR ZAF ISR KOR BRIICS CHL JPN CHN IDN Source: OECD calculations based on United States Patent and Trademark Office Bulk Downloads: Trademark Application Text hosted by Google cloud ( and OHIM Community Trademark Database; CTM Download, 211.
31 BARRIERS TO SERVICE INNOVATION AND PUBLIC SUPPORT
32 Relative to high tech manufacturing, firms in service sector tend to report fewer or similar obstacles to innovation Relative likelihood of reporting hampering factors as important by sector, High-tech manufacturing Other manufacturing KIS Other services No need because of no demand for innovation No need due to prior innovation Uncertain demand for innovation Lack of funds within enterprise Lack of finance from outside Innovation costs too high Lack of qualified personnel Market dominated by established enterprises Difficulty in finding cooperation partners Lack of information on technology Lack of information on markets Source:: OECD calculations based on CIS 26 microdata (Eurostat), 212 Note: Weighted. EU-11 (CZE, ESP, EST, GRC, HUN, IRL, LUX, NOR, PRT, SVK, SWE). Marginal effect of belonging to each sector category on the probability to consider each hampering factor as of medium or high importance, obtained from probit model regressions run on each hampering factor. Baseline=High-tech manufacturing.
33 With a few exceptions, firms in services are less likely to receive public financial support for innovation Share of firms receiving public financial support for innovation activities by sector category and country % High-tech manufacturing Other manufacturing Knowledge-intensive services Other services AUT FIN NLD DEU BEL ITA ESP PRT CZE FRA EST HUN AUS SVK Source: OECD calculations based on CIS 28 microdata (Eurostat), 212 and national innovation surveys from Australia, Austria and Belgium Note: Weighted. Public financial support corresponds to support from local or regional authorities, central government or the European Union. This variable is by construction equal to zero for firms that are not innoactive, i.e. firms without product or process innovation, neither actual nor ongoing or abandoned in the CIS framework
34 The sectoral public funding for innovation gap has narrowed slightly over time in most countries Relative likelihood of manufacturing firms to receive public financial support compared to services in and LUX PRT HUN NLD BEL DEU POL ESP SVK CZE EST Source: OECD calculations based on Eurobase CIS 21 and CIS 26 microdata (Eurostat), 212 Notes: Unweighted. The points represent the ratio of the share of innoactive firms receiving public financial support in manufacturing to those in services in the corresponding countries and years. Innoactive firms are those with product or process innovation, or ongoing/abandoned activities for product or process innovation.
35 The sectoral distribution of R&D tax incentives resembles that of business R&D spending 7 Proportion of services in BERD and R&D tax incentives, 28 (or nearest year) GBR CAN FRA USA CZE NDL JPN Share of services in business R&D, main activity Share of R&D tax incentives to service sector Source: OECD/NESTI R&D tax incentives questionnaire, MSTI, RDS.
36 Public support is associated with higher rates of service innovation Effect of public support on the propensity of firms to introduce different types of innovations Product new to market Product Goods Service Marketing Organisational Product or process Source: OECD calculations based on CIS 28 microdata (Eurostat), 212 Note: Weighted. EU-13 (CZE, DEU, ESP, EST, FIN, FRA, HUN, ITA, LUX, NLD, PRT, SVK, SVN). Marginal effect of support on firms' likelihood to introduce different types of innovation, obtained from probit model regressions controlling for size, country and belonging to a domestic/multinational group. The regressions were run on the sample of innoactive firms, that is firms with product or process innovation, or ongoing/abandoned activities for product or process innovation. White bars correspond to coefficients that are not significant at the 5 % level.
37 KEY MESSAGES
38 Preliminary conclusions from the analysis 1. The distinction between R&D and innovation is far more important in services. These two terms are too often confused in the debate. 2. Service innovation is widespread and takes place across all sectors. It has specific features of relevance to policy makers: It plays a pivotal role in business innovation strategies. It is more reliant on external inputs and more collaborative than other types Innovation relationships are primarily market-based, with suppliers, customers and firms in same group and market. Service sector companies use rather different mechanisms to appropriate the benefits of their innovations 3. Service innovation is positively related to employment and turnover growth, and the evidence appears to be consistent with positive spillovers 4. Service firms do not report higher incidence of barriers to innovation, but the data suggest limited awareness among less knowledge intensive services 5. Service firms less likely to receive public support for innovation, which is mainly oriented towards R&D.
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