Services, Innovation, and R&D Ian Miles, PREST/MBS Drawing on studies: “The Future of R&D in Services” and  RENESER “Resea...
The Issues <ul><li>R&D and innovation </li></ul><ul><li>Why the concern (in the EU)? </li></ul><ul><li>The statistical pic...
R&D and Innovation  – Linear Model  (manufacturing) Science Base Industrial R&D Process  Innovation Product  Innovation Us...
R&D and Innovation  – modifying the Linear Model Production Engineering innovation User/client-led  innovation Strategic R...
EU vs US trends Services share of BERD EU US 0  5   10  15  20  25  30  35 Source: from OECD ANBERD database 2003 Growth s...
UK - Services vs Manufacturing R&D £m  UK data slow increase in services’ share of total, since slopes are equal…  but sti...
In general - services’ R&D is growing faster Real Growth Rates of Business Expenditure on R&D as a share of GDP, 1987-1999...
Which Services do R&D? R&D Survey data, c2000 Share of business R&D Jp 7 Ge 8 EU  7 Fr 4 SK 0 UK 4 It  0 Ca 2 US 3 Sectors...
Schematically.. <ul><li>R&D and IT/technology-based KIBS are R&D-active everywhere </li></ul><ul><li>Professional services...
Services performing R&D – CIS data EU15 CIS2 data – Bruce Tether analysis Sectors Size
Schematically.. <ul><li>More than 50% of service firms report R&D!  Even small firms. </li></ul><ul><li>R&D and IT/technol...
Official Data <ul><li>Services’ R&D </li></ul><ul><ul><li>Sometimes data are misleadingly positive - thus US trade R&D is ...
Official Data office electronics pharma
Challenges to Official Statistics <ul><li>Services’ R&D </li></ul><ul><ul><li>Sometimes data are misleadingly positive - t...
Challenges to Official Statistics <ul><li>Services’ R&D </li></ul><ul><ul><li>Sometimes data are misleadingly positive - t...
<ul><li>Services’ R&D </li></ul><ul><ul><li>Sometimes data are misleadingly positive - thus US trade R&D is overstated </l...
Challenges to Official Statistics <ul><li>Services’ R&D </li></ul><ul><ul><li>Sometimes data are misleadingly positive - t...
<ul><li>Services’ R&D </li></ul><ul><ul><li>Sometimes data are misleadingly positive - thus US trade R&D is overstated </l...
Services R&D may well be  lower, even if it is underreported <ul><li>“ INTRINSIC” REASONS: </li></ul><ul><li>Services  cor...
Case Studies <ul><li>Examined such sectors as : </li></ul><ul><li>Broadcasting </li></ul><ul><li>Professional Team Sports ...
Case Studies 1 <ul><li>Not all sectors have R&D-type activity - but many do.  ( Our particular subsectors may diverge from...
Further Detail <ul><li>Technology-related services - IT, R&D, broadcasting - are undergoing rapid technological change and...
Workshops <ul><li>Confirm sectoral studies as to ambiguous natures of services R&D/innovation; possibility for both highly...
Distribution of Services’ Expenditure on  Innovation CIS2 data – Bruce Tether analysis RD - Internal R&D;  ARD - Acquired ...
R&D and Innovation – modifying the Linear Model Production Engineering innovation User/client-led  innovation Strategic Re...
R&D and Innovation in Services Supplier-led innovation Client-led innovation Innovation management…. HR etc Practice-led i...
Interventions may promote change: <ul><li>Generally services neglected in innovation and R&D policy - but there is now  so...
R&D Policy Initiatives – e.g. BMBF
Futures <ul><li>Services’ R&D is likely to grow   </li></ul><ul><ul><li>innovation pressure, learning from others </li></u...
Data, Indicators <ul><li>Better measurement (sampling, surveys) - not to reach targets faster but to inform policy </li></...
Policy <ul><li>Better measurement (sampling, surveys) - not to reach targets faster but to inform policy </li></ul><ul><li...
Policy <ul><li>Better measurement - not to reach targets faster but to inform policy </li></ul><ul><li>Better targeting of...
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Service Innovation and R&D

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Why are services (usually) low R&D performers? How does R&D relate to services innovation?

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Service Innovation and R&D

  1. 1. Services, Innovation, and R&D Ian Miles, PREST/MBS Drawing on studies: “The Future of R&D in Services” and RENESER “Research Needs for Service Industries” conducted for the European Commission, DGs Research and Enterprise by PREST (UK) + Dialogic (Netherlands), + ARCS (Austria), IAS (Germany), SERVILAB (Spain), TNO (Netherlands)
  2. 2. The Issues <ul><li>R&D and innovation </li></ul><ul><li>Why the concern (in the EU)? </li></ul><ul><li>The statistical picture </li></ul><ul><li>What should we say about the statistics? </li></ul><ul><li>How, when, and why do services do R&D? </li></ul><ul><li>The roles of R&D in innovation in services </li></ul><ul><li>Future prospects </li></ul>
  3. 3. R&D and Innovation – Linear Model (manufacturing) Science Base Industrial R&D Process Innovation Product Innovation Use in Markets Production Process
  4. 4. R&D and Innovation – modifying the Linear Model Production Engineering innovation User/client-led innovation Strategic Research, Applied R&D in HEIs Science Base Industrial R&D Process Innovation Product Innovation Use in Markets Production Process
  5. 5. EU vs US trends Services share of BERD EU US 0 5 10 15 20 25 30 35 Source: from OECD ANBERD database 2003 Growth slightly faster in EU, but base seems to be much lower: will take decades to catch up at this rate – if the data are to be believed 2000 2000 1991 1991
  6. 6. UK - Services vs Manufacturing R&D £m UK data slow increase in services’ share of total, since slopes are equal… but still services are well below their economic weight.
  7. 7. In general - services’ R&D is growing faster Real Growth Rates of Business Expenditure on R&D as a share of GDP, 1987-1999 But is this a statistical artefact - improved measurement? But is this a statistical artefact - improved measurement? US EU15
  8. 8. Which Services do R&D? R&D Survey data, c2000 Share of business R&D Jp 7 Ge 8 EU 7 Fr 4 SK 0 UK 4 It 0 Ca 2 US 3 Sectors where no data available: R&D IT COMMS TRADE
  9. 9. Schematically.. <ul><li>R&D and IT/technology-based KIBS are R&D-active everywhere </li></ul><ul><li>Professional services (non-technological) hidden in “other services” and rarely register (despite market research, etc!) </li></ul><ul><li>Wholesale and Retail Trade in North America (apparently) </li></ul><ul><li>Transport in France – different surveying approach, or industrial structure? </li></ul>
  10. 10. Services performing R&D – CIS data EU15 CIS2 data – Bruce Tether analysis Sectors Size
  11. 11. Schematically.. <ul><li>More than 50% of service firms report R&D! Even small firms. </li></ul><ul><li>R&D and IT/technology-based KIBS are more likely to be R&D-active and to engage in R&D continuously </li></ul><ul><li>Likewise larger firms </li></ul><ul><li>R&D activity is associated </li></ul> with internal development of innovations
  12. 12. Official Data <ul><li>Services’ R&D </li></ul><ul><ul><li>Sometimes data are misleadingly positive - thus US trade R&D is overstated </li></ul></ul>office electronics pharma
  13. 13. Official Data office electronics pharma
  14. 14. Challenges to Official Statistics <ul><li>Services’ R&D </li></ul><ul><ul><li>Sometimes data are misleadingly positive - thus US trade R&D is overstated </li></ul></ul><ul><ul><li>(Other US/EU differences may be more matter of sectoral composition – US dominance in high-tech services) </li></ul></ul><ul><ul><li>Likely that more generally, services’ R&D understated; </li></ul></ul><ul><ul><ul><li>formulation of survey questionnaires is very oriented to manufacturing practices and processes - US and Euro studies recommend change </li></ul></ul></ul><ul><ul><ul><li>sampling of service firms is problematic </li></ul></ul></ul><ul><ul><ul><li>exclusion of social science </li></ul></ul></ul>
  15. 15. Challenges to Official Statistics <ul><li>Services’ R&D </li></ul><ul><ul><li>Sometimes data are misleadingly positive - thus US trade R&D is overstated </li></ul></ul><ul><ul><li>(Other US/EU differences may be more matter of sectoral composition – US dominance in high-tech services) </li></ul></ul><ul><ul><li>Likely that more generally, services’ R&D understated; </li></ul></ul><ul><ul><ul><li>formulation of survey questionnaires is very oriented to manufacturing practices and processes - US and Euro studies recommend change </li></ul></ul></ul><ul><ul><ul><li>sampling of service firms is problematic </li></ul></ul></ul>
  16. 16. <ul><li>Services’ R&D </li></ul><ul><ul><li>Sometimes data are misleadingly positive - thus US trade R&D is overstated </li></ul></ul><ul><ul><li>(Other US/EU differences may be more matter of sectoral composition – US dominance in high-tech services) </li></ul></ul><ul><ul><li>Likely that more generally, services’ R&D understated; </li></ul></ul><ul><ul><ul><li>formulation of survey questionnaires is very oriented to manufacturing practices and processes - US and Euro studies recommend change </li></ul></ul></ul><ul><ul><ul><li>sampling of service firms is problematic </li></ul></ul></ul>Defining and Measuring Organisation – few R&D departments and managers Employment – often not specialised task, part of wider activity Innovation – much design, much on-job development R&D
  17. 17. Challenges to Official Statistics <ul><li>Services’ R&D </li></ul><ul><ul><li>Sometimes data are misleadingly positive - thus US trade R&D is overstated </li></ul></ul><ul><ul><li>(Other US/EU differences may be more matter of sectoral composition – US dominance in high-tech services) </li></ul></ul><ul><ul><li>Likely that more generally, services’ R&D understated; </li></ul></ul><ul><ul><ul><li>formulation of survey questionnaires is very oriented to manufacturing practices and processes - US and Euro studies recommend change </li></ul></ul></ul><ul><ul><ul><li>sampling of service firms is problematic </li></ul></ul></ul><ul><ul><ul><li>exclusion of social science </li></ul></ul></ul>
  18. 18. <ul><li>Services’ R&D </li></ul><ul><ul><li>Sometimes data are misleadingly positive - thus US trade R&D is overstated </li></ul></ul><ul><ul><li>(Other US/EU differences may be more matter of sectoral composition – US dominance in high-tech services) </li></ul></ul><ul><ul><li>Likely that more generally, services’ R&D understated; </li></ul></ul><ul><ul><ul><li>formulation of survey questionnaires is very oriented to manufacturing practices and processes - US and Euro studies recommend change </li></ul></ul></ul><ul><ul><ul><li>sampling of service firms is problematic </li></ul></ul></ul><ul><ul><ul><li>exclusion of social science </li></ul></ul></ul>Defining and Measuring Frascati Manual – include social science in definition of R&D R&D surveys – exclude social research explicitly or implicitly Tax`credits - exclude social research explicitly Organisation – few R&D departments and managers Employment – often not specialised task, part of wider activity Innovation – much design, much on-job development R&D
  19. 19. Services R&D may well be lower, even if it is underreported <ul><li>“ INTRINSIC” REASONS: </li></ul><ul><li>Services core activities , products, processes (e.g. more human-oriented, more customised) less amenable to the sorts of technological innovation </li></ul><ul><li>Need to engage with clients might discourage radical technological change. Much innovation here may involve client involvement and one-off solutions, and/or some level of customization. </li></ul><ul><li>Organisation in SMEs </li></ul><ul><li>Non-R&D based innovation – e.g. quality improvement, professional networks and activities, etc. </li></ul><ul><li>“ HISTORICAL” REASONS: </li></ul><ul><li>“ Reverse product cycle” : services moving away from being supplier-led. </li></ul><ul><li>Worse linkage into national innovation systems . </li></ul><ul><li>The organization of innovation in services does not usually involve the classic model of R&D departments; it is project-based and less likely to be known as R&D; may be based in many locations </li></ul>
  20. 20. Case Studies <ul><li>Examined such sectors as : </li></ul><ul><li>Broadcasting </li></ul><ul><li>Professional Team Sports </li></ul><ul><li>Tourism </li></ul><ul><li>Market research (social information) </li></ul><ul><li>Research services </li></ul><ul><li>Financial intermediation – venture capital </li></ul><ul><li>Transport/Logistics </li></ul><ul><li>Computer services </li></ul><ul><li>Telecommunications services </li></ul><ul><li>Architecture/Engineering services. </li></ul>
  21. 21. Case Studies 1 <ul><li>Not all sectors have R&D-type activity - but many do. ( Our particular subsectors may diverge from their wider sectors - e.g. financial services.) </li></ul><ul><li>Much unreported, much not conceptualised as R&D, much not organised as traditional R&D </li></ul><ul><li>Variation within sectors as well as across them (e.g. broadcasting) </li></ul><ul><li>General expectation for more innovation emphasis </li></ul><ul><li>In many cases leads to expectation of more R&D-like activity. But not in general, more reporting of R&D. (In one case, may be less reporting of R&D!) </li></ul>
  22. 22. Further Detail <ul><li>Technology-related services - IT, R&D, broadcasting - are undergoing rapid technological change and much associated turbulence - and development is global… </li></ul><ul><li>Apparently public services more likely to use the term R&D and to link to public research (?) </li></ul><ul><li>R&D used to refer to more technological activities - but much innovation is in organisational, service, creative content, and related areas </li></ul><ul><li>Much “research” in contrast is scanning/watch (incl. Most market research) </li></ul><ul><li>Acquisition of technology is important source of innovation </li></ul>
  23. 23. Workshops <ul><li>Confirm sectoral studies as to ambiguous natures of services R&D/innovation; possibility for both highly technical and more spontaneous innovation, not “captured” for subsequent reproduction </li></ul><ul><li>Much existing innovation policy not seen as relevant </li></ul><ul><li>Doubts about improving measurement, about effect of tax credits - though there was some support for tax credits and for accounting for intangibles </li></ul><ul><li>Benchmarking, learning and emulating best practice , etc. were often more important than R&D. </li></ul><ul><li>Training for innovation, esp. for SMEs, seen as vital. </li></ul><ul><li>Means of Support for collaboration and integration in innovation systems seen as useful. </li></ul>
  24. 24. Distribution of Services’ Expenditure on Innovation CIS2 data – Bruce Tether analysis RD - Internal R&D; ARD - Acquired R&D TR - Training; PR - Preparations; MI - Market Introduction; OET - Aquired Other External Technologies; ME - Acquired Machinery & Equipment Transport Wholesale Financial sers Technical sers Computer sers
  25. 25. R&D and Innovation – modifying the Linear Model Production Engineering innovation User/client-led innovation Strategic Research, Applied R&D in HEIs Science Base Industrial R&D Process Innovation Product Innovation Use in Markets Production Process
  26. 26. R&D and Innovation in Services Supplier-led innovation Client-led innovation Innovation management…. HR etc Practice-led innovation Professions-led innovation Science Base Industrial R&D Process Innovation Product Innovation Use in Markets Production Process
  27. 27. Interventions may promote change: <ul><li>Generally services neglected in innovation and R&D policy - but there is now some R&D policy for services and R&D-relevant initiatives </li></ul><ul><li>Initiatives like IBM’s “service science”, NSF “service engineering” </li></ul>
  28. 28. R&D Policy Initiatives – e.g. BMBF
  29. 29. Futures <ul><li>Services’ R&D is likely to grow </li></ul><ul><ul><li>innovation pressure, learning from others </li></ul></ul><ul><ul><li>technological change, new platforms </li></ul></ul><ul><ul><li>organisational change (alliances, concentration, management thinking - incl service science?), </li></ul></ul><ul><ul><li>overcoming heritage in management and innovation systems, </li></ul></ul><ul><ul><li>R&D policy </li></ul></ul><ul><ul><li>recorded growth due to better measurement </li></ul></ul><ul><li>Share of R&D from services is likely grow due to changes in sectoral composition (T-KIBS and other tech-based services e.g. new types of content service) </li></ul><ul><li>Will be long time before many (esp low-tech) services attain R&D levels comparable to manufacturing, but small increases could have big effects on innovation </li></ul>
  30. 30. Data, Indicators <ul><li>Better measurement (sampling, surveys) - not to reach targets faster but to inform policy </li></ul><ul><ul><li>e.g. policy for Services R&D, understanding of services’ innovation </li></ul></ul><ul><ul><li>may lead to wider concept of R&D - R&D+ </li></ul></ul><ul><ul><li>better understanding of services innovation needed to position R&D in services innovation - should not assume that it is the route to innovation, could even be counterproductive </li></ul></ul><ul><ul><li>but often increased awareness and opportunities for R&D+ should yield benefits </li></ul></ul>
  31. 31. Policy <ul><li>Better measurement (sampling, surveys) - not to reach targets faster but to inform policy </li></ul><ul><li>Better targeting of “mainstream” R&D and innovation programmes to engage services </li></ul><ul><ul><li>beyond the usual suspects </li></ul></ul><ul><ul><li>some re-engineering of innovation systems </li></ul></ul><ul><ul><li>awareness and promotion (incl. some benchmarking with service examples, etc.) </li></ul></ul>
  32. 32. Policy <ul><li>Better measurement - not to reach targets faster but to inform policy </li></ul><ul><li>Better targeting of “mainstream” R&D and innovation programmes to engage services </li></ul><ul><li>Services-oriented R&D and innovation programmes </li></ul><ul><ul><li>from science and industrial policy angles (draw on examples of good practice) </li></ul></ul><ul><ul><li>relate to ongoing initiatives where useful </li></ul></ul><ul><ul><li>support for new generations of innovation management </li></ul></ul><ul><ul><li>... </li></ul></ul>
  33. 33. End of Presentation
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