Cambridge academics publish new research on innovation in the service industry

Taking Services Seriously, an analysis of how policy can stimulate innovation in the service industry, has been written by Cambridge academics from the Programme on Regional Innovation, Cambridge-MIT Partnership Programme for the National Endowment for Science, Technology and the Arts (NESTA).

Drawing on data from more than 16,000 firms, they reveal how the sometimes high levels of innovation within the service sector remain under-represented at a policy level.

They suggest that this is largely because they work in a different way from the more familiar innovations of manufacturing and industry.

But the report also cautions that most firms lack the skilled personnel and intelligence on markets and technology that would allow them to become more productive and competitive, and urges policymakers, universities and businesses to come together over the next few years to turn the situation around.

Whilst computer services and research and development companies fare well, with relatively high numbers of firms reporting the introduction of new and improved products (60% and 46% of companies surveyed), overall only 24% of firms are introducing new services and products.

A number of obstacles are faced by companies hoping to innovate, with the pressures of expense and EU and UK regulations featuring amongst the barriers.

The authors, Maria Abreu, Vadim Grinevich, Michael Kitson, and Maria Savona, suggest a number of ways in which these problems could be remedied, many of them based on models already existing for use by advanced manufacturing.

They advocate the establishment of an Innovation Advisory Service to act as a brokerage service for advice and expertise on the effective exploitation of technology, and the implementation of a Learning Tax Credit, particularly for small firms who face difficulties in investing the time and resources needed for staff training.

At a policy level, they recommend the introduction of regular, industry-led review groups to produce specific, practical recommendations to improve policy and regulation for the service industry, as well as a framework for measuring hitherto hidden innovations so that policymakers can accurately measure their importance.

Universities also have a role to play in this area, examining how their research, particularly in the humanities and social sciences, can be applied to these sectors, and working with businesses to develop projects in the relevant disciplines.

Their report has particular relevance for the UK, where more than 75% of the economy is based on a diverse range of services, from the financial industry to tourism.

Industrialised economies the world over have shifted away from manufacturing over the past 50 years, but the UK has moved to a service-based economy at an unusually swift rate.

The mission of the Programme on Regional Innovation is to develop world class research which will provide evidence for improved policy and practice for advancing knowledge-based growth in urban and regional economies.

The programme’s goals include:

1. Developing a leading programme on the economic and social dimensions of urban and regional competitiveness.
2. Educating students and practitioners in techniques for understanding and influencing local and regional systems of innovation.
3. Informing evidence-based policy development.

   Further information on the programme is available on its website (see sidebar).