service innovation and the EU economy

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2005 presentation on service innovation, productivity, R&D, and EU performance

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service innovation and the EU economy

  1. 1. Service Innovation and the European Economy - from Lisbon to London Ian Miles PREST, MBS, University of Manchester [email_address]
  2. 2. Service Innovation and the European Economy - outline <ul><li>Lisbon Objectives and the role of services </li></ul><ul><li>Services in Europe </li></ul><ul><li>Services Innovation </li></ul><ul><li>What Directions for Knowledge-Based Policy? </li></ul>
  3. 3. Lisbon Objectives <ul><li>Lisbon 2000: EU governments in agreed a series of reforms at national and European level – to establish an effective internal market, boost research and innovation , improve education, etc. - to make the European Union “ the most dynamic and competitive knowledge-based economy in the world ” by 2010. </li></ul><ul><li>Barcelona Target 2002: R&D at 3% of GDP. </li></ul><ul><li>Now, we are now half-way through the process and under the UK presidency. (Hampton Court, London, 2005) </li></ul><ul><li>“ Results are not very satisfactory. The implementation of reform in Member States has been quite scarce…To remedy this lack of commitment of Member States, the Commission proposed to establish a new kind of partnership with Member States. It also decided to focus efforts on two main areas: productivity and employment . To make things simpler and more coherent, there should be just one national growth programme and one EU growth plan.” </li></ul>
  4. 4. EU falls behind in research By Clive Cookson in London and George Parker in Brussels Published: October 23 2005 The European Union has fallen further behind the rest of the world in research and development spending according to new figures published on Monday… The increase in corporate R&D investment for 2004-05 was 2 per cent in Europe but 7 per cent in the US and Asia, according to the International R&D Scoreboard. South Korea had the most spectacular annual growth in R&D investment - 40 per cent - led by Samsung Electronics, Hyundai Motor and LG Electronics. The increase for Japan was a more modest 4 per cent. Europe's failure to keep pace with its competitors in &quot;a race to the top&quot; will be a key theme of this Thursday's EU summit at Hampton Court, near London. … A priority of the British presidency of the EU is to refocus the Union's €100bn-a-year budget towards R&D and away from traditional support for farming and struggling regions…. The R&D research and development scoreboard … lists the world's top 1,000 companies by R&D spending…. European companies as a whole have not increased R&D investment over the past four years, while their US counterparts are spending 12 per cent more on R&D than their four-year average. ….
  5. 5. The EU service economy Percentage Shares of Employment Service sectors are reported here: there are also growing shares of service activities within firms in other sectors sector ^
  6. 6. Productivity Trends <ul><li>Long-term convergence in labour productivity (GDP/hour worked) between EU and US seems to have reversed since 2000 </li></ul>40 38 36 32 30 1990 1992 1994 1996 1998 2000 2002 03 EU US
  7. 7. Productivity and Services <ul><li>Renewed divergence in labour productivity since c2000... </li></ul><ul><li>Differences in services productivity growth – especially in most recent period - seem critical (van Ark, Euro Compet. Report )  “Distributive Trade” (Retail and wholesale), “Financial services”. (van Ark: 47% of US productivity growth 1995-2002; but 16% for EU15) </li></ul><ul><li>These are often seen as “supplier dominated” services, not the high-tech services like IT, R&D, software... </li></ul><ul><li>Much speculation about causes of differences (andmajor variations across EU!) Serious questions remain about quality and meaning of statistics. (Numerous complicated issues which act in various directions.) Growth of service economy is intensifying measurement issues. </li></ul>
  8. 8. Services and R&D <ul><li>Services were not traditionally expected to perform R&D - when we began measuring it, it emerged that they do! </li></ul>
  9. 9. In general - services’ R&D growing faster US EU15 Services and R&D But is this a statistical artefact - improved measurement? Real Growth Rates of Business Expenditure on R&D as a share of GDP, 1987-1999
  10. 10. Services and R&D <ul><li>Services were not traditionally expected to perform R&D - when we began measuring it, it emerged that they do! </li></ul><ul><li>Again, large and growing US/EU differentials </li></ul><ul><li>Rapid growth in trade R&D in services seems a statistical artefact </li></ul><ul><li>US IT-related services particularly high R&D </li></ul><ul><li>But – again – R&D has measurement problems. (1) Services’ R&D is understated. (2) Services’ R&D is different. (3) Services’ innovation is not just a matter of R&D. </li></ul>
  11. 11. (Technology) Innovation Expenditure, Leading Services
  12. 12. Services Innovation <ul><li>We now recognise that services (can be) highly innovative </li></ul><ul><li>We are beginning to understand how services innovation may have its own characteristics </li></ul><ul><li>And how various types of services vary considerably in terms of innovation </li></ul>
  13. 13. Overall – services are slightly less likely to innovate But some services – especially KIBS – are highly innovative. Innovative effort also tends to be lower, and focused on acquisition. And many of these are sources of innovation for whole economy Typically – poorer links to innovation systems.
  14. 14. Services Innovation Styles differ Source: Howells and Tether 2004
  15. 15. Barriers to Innovation 1998-2000 (CIS3) Lack of Innovation Economic Lack of Lack of Organisl. Lack of Regulatory Lack of Financing costs costs personnel market rigidities technical constraints response information information source: Pilat presentation of CIS3 data
  16. 16. Where is the service economy going? <ul><li>New forms of innovation. </li></ul><ul><li>Focus of innovation changing. </li></ul><ul><li>Increasing use of IT in innovation. Increasing role of Knowledge Intensive Business Services in innovation. </li></ul><ul><li>Difficult to grasp through traditional models and measurement. </li></ul><ul><li>Need for action and experimentation in innovation policy – and practically all policy areas that bear on innovation. </li></ul>
  17. 17. Implications <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><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>
  18. 18. End of Presentation

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