service innovation and r&d
DESCRIPTION
Why are services (usually) low R&D performers? How does R&D relate to services innovation?TRANSCRIPT
PREST
SEM 2006
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 Enterpriseby
PREST (UK) + Dialogic (Netherlands), + ARCS (Austria), IAS (Germany), SERVILAB (Spain), TNO (Netherlands)
PREST
SEM 2006
The Issues
• R&D and innovation
• Why the concern (in the EU)?
• The statistical picture
• What should we say about the statistics?
• How, when, and why do services do R&D?
• The roles of R&D in innovation in services
• Future prospects
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R&D and Innovation – Linear Model
(manufacturing)
Science Base Industrial R&D
Process Innovation
Product Innovation
Use in Markets
Production Process
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Production Engineering
innovation
R&D and Innovation – modifying the Linear Model
Science Base Industrial R&D
Process Innovation
Product Innovation
Use in Markets
Production Process
User/client-led innovation
Strategic Research, Applied R&D in HEIs
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SEM 2006
EU vs US trendsServices 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
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UK - Services vs Manufacturing R&D
0
2000
4000
6000
8000
10000
12000
1987 1992 1997 2002
Manufacturing
Services
Linear(Manufacturing)Linear(Services)
£m UK dataslow increase in services’ share of total, since slopes are
equal… but still services are well below their economic weight.
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-5
0
5
10
15
20
25
30
UK FIN I EU15 E DK JP EL F D NL P US B S IRL
Manufacturing Services
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?
-5
0
5
10
15
20
25
30
UK FIN I EU15 E DK JP EL F D NL P US B S IRL
Manufacturing Services
But is this a statistical artefact - improved measurement?
US
EU15
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Which Services do R&D?
R&D Survey data, c2000
Sh
are
of
bu
sin
ess
R&
DJp 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
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Schematically..
• R&D and IT/technology-based KIBS are R&D-active everywhere
• Professional services (non-technological) hidden in “other services” and rarely register (despite market research, etc!)
• Wholesale and Retail Trade in North America (apparently)
• Transport in France – different surveying approach, or industrial structure?
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SEM 2006
Services performing R&D – CIS data
EU15 CIS2 data – Bruce Tether analysis
Sectors
Size
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Schematically..
• More than 50% of service firms report R&D! Even small firms.
• R&D and IT/technology-based KIBS are more likely to be R&D-active and to engage in R&D continuously
• Likewise larger firms• R&D activity is associated with internal
development of innovations
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Official Data• Services’ R&D
– Sometimes data are misleadingly positive - thus US trade R&D is overstated
office
electronics
pharma
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Official Data
office
electronics
pharma
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Challenges to Official Statistics
• Services’ R&D– Sometimes data are misleadingly positive - thus US trade
R&D is overstated– (Other US/EU differences may be more matter of
sectoral composition – US dominance in high-tech services)
– Likely that more generally, services’ R&D understated; • formulation of survey questionnaires is very oriented to
manufacturing practices and processes - US and Euro studies recommend change
• sampling of service firms is problematic• exclusion of social science
PREST
SEM 2006
Challenges to Official Statistics
• Services’ R&D– Sometimes data are misleadingly positive - thus US trade
R&D is overstated– (Other US/EU differences may be more matter of
sectoral composition – US dominance in high-tech services)
– Likely that more generally, services’ R&D understated; • formulation of survey questionnaires is very oriented to
manufacturing practices and processes - US and Euro studies recommend change
• sampling of service firms is problematic•
PREST
SEM 2006
• Services’ R&D– Sometimes data are misleadingly positive - thus US trade
R&D is overstated– (Other US/EU differences may be more matter of
sectoral composition – US dominance in high-tech services)
– Likely that more generally, services’ R&D understated; • formulation of survey questionnaires is very oriented to
manufacturing practices and processes - US and Euro studies recommend change
• sampling of service firms is problematic•
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
PREST
SEM 2006
Challenges to Official Statistics
• Services’ R&D– Sometimes data are misleadingly positive - thus US trade
R&D is overstated– (Other US/EU differences may be more matter of
sectoral composition – US dominance in high-tech services)
– Likely that more generally, services’ R&D understated; • formulation of survey questionnaires is very oriented to
manufacturing practices and processes - US and Euro studies recommend change
• sampling of service firms is problematic• exclusion of social science
PREST
SEM 2006
• Services’ R&D– Sometimes data are misleadingly positive - thus US trade
R&D is overstated– (Other US/EU differences may be more matter of
sectoral composition – US dominance in high-tech services)
– Likely that more generally, services’ R&D understated; • formulation of survey questionnaires is very oriented to
manufacturing practices and processes - US and Euro studies recommend change
• sampling of service firms is problematic• exclusion of social science
Defining and Measuring
Frascati Manual – include social science in definition of R&DR&D surveys – exclude social research explicitly or implicitlyTax`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
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SEM 2006
Services R&D may well be lower, even if it is underreported
“INTRINSIC” REASONS:• Services core activities, products, processes (e.g. more human-oriented, more customised) less amenable to the sorts of technological innovation • 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.• Organisation in SMEs• Non-R&D based innovation– e.g. quality improvement, professional networks and activities, etc.
“HISTORICAL” REASONS:• “Reverse product cycle”: services moving away from being supplier-led.• Worse linkage into national innovation systems.•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
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Case Studies
Examined such sectors as :• Broadcasting• Professional Team Sports• Tourism• Market research (social information)• Research services• Financial intermediation – venture capital• Transport/Logistics• Computer services• Telecommunications services• Architecture/Engineering services.
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Case Studies 1• Not all sectors have R&D-type activity - but many
do. (Our particular subsectors may diverge from their wider sectors - e.g. financial services.)
• Much unreported, much not conceptualised as R&D, much not organised as traditional R&D
• Variation within sectors as well as across them (e.g. broadcasting)
• General expectation for more innovation emphasis• 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!)
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Further Detail• Technology-related services - IT, R&D,
broadcasting - are undergoing rapid technological change and much associated turbulence - and development is global…
• Apparently public services more likely to use the term R&D and to link to public research (?)
• R&D used to refer to more technological activities - but much innovation is in organisational, service, creative content, and related areas
• Much “research” in contrast is scanning/watch (incl. Most market research)
• Acquisition of technology is important source of innovation
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Workshops• 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
• Much existing innovation policy not seen as relevant• Doubts about improving measurement, about effect of tax
credits - though there was some support for tax credits and for accounting for intangibles
• Benchmarking, learning and emulating best practice , etc. were often more important than R&D.
• Training for innovation, esp. for SMEs, seen as vital.• Means of Support for collaboration and integration in innovation
systems seen as useful.
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SEM 2006
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
Distribution of Services’ Expenditure
on Innovation
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SEM 2006
Production Engineering
innovation
R&D and Innovation – modifying the Linear Model
Science Base Industrial R&D
Process Innovation
Product Innovation
Use in Markets
Production Process
User/client-led innovation
Strategic Research, Applied R&D in HEIs
PREST
SEM 2006
R&D and Innovation in Services
Science Base Industrial R&D
Process Innovation
Product Innovation
Use in Markets
Production Process
Supplier-led innovation
Client-led innovation
Innovation management…
. HR etc
Practice-led innovation
Professions-led innovation
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Interventions may promote change:
• Generally services neglected in innovation and R&D policy - but there is now some R&D policy for services and R&D-relevant initiatives
• Initiatives like IBM’s “service science”, NSF “service engineering”
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SEM 2006
R&D Policy Initiatives – e.g. BMBF
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SEM 2006
Futures
• Services’ R&D is likely to grow – innovation pressure, learning from others– technological change, new platforms– organisational change (alliances, concentration, management
thinking - incl service science?), – overcoming heritage in management and innovation systems,– R&D policy– recorded growth due to better measurement
• 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)
• 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
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SEM 2006
Data, Indicators• Better measurement (sampling, surveys) - not
to reach targets faster but to inform policy– e.g. policy for Services R&D, understanding of services’
innovation– may lead to wider concept of R&D - R&D+– 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
– but often increased awareness and opportunities for R&D+ should yield benefits
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Policy• Better measurement (sampling, surveys) -
not to reach targets faster but to inform policy
• Better targeting of “mainstream” R&D and innovation programmes to engage services– beyond the usual suspects– some re-engineering of innovation systems– awareness and promotion (incl. some
benchmarking with service examples, etc.)
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SEM 2006
Policy• Better measurement - not to reach targets faster but
to inform policy• Better targeting of “mainstream” R&D and
innovation programmes to engage services• Services-oriented R&D and innovation programmes
– from science and industrial policy angles (draw on examples of good practice)
– relate to ongoing initiatives where useful– support for new generations of innovation management – ...
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SEM 2006
End of Presentation