promoting the role of r&d in services

8/14/2019 Promoting the role of R&D in services

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European Union

Scientific and Technical Research Committee

EUR 23475 EN

2009

Promoting the roleof R&D in services

Report of the CRESTR&D in servicesWorking Group


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EUROPEAN COMMISSION

Promoting the Role of R&D in S

A report of the CREST OMC 3% Working

R&D in Services


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Acknowledgment

The working group was chaired by Paula Nyberg from the Minihad members from 14 countries as follows:

Austria: Haidar Anni

Belgium: Chantal Kegels, Anne-Marie Straus

Germany: Ranjana Sarkar, Ursula Zahn-Elliott

Denmark: Vibeke Hein Olsen, Nikolaj Helm-Petersen, Jacob Nis

Finland: Paula Nybergh, Tiina Tanninen -Ahonen, Jari Kuusisto

Greece: VassilikiMestaneos, Aliki Pappa

Ireland: Jos Evertsen

Iceland: Eva BraAlsteinsdottir, Eirikur Baldursson

Lithuania: BiruteMikulskiene

Luxembourg: LeonDiederich, Robert Kerger

Norway: Vemund Riiser, Lise Sund Valand

Sweden: UlfBlomqvist, Ulf Eklund, Goran Marklund, Jonas Mat

Turkey:Mehmet Aslan

United Kingdom: MarkBeatson, Sandra Bulli


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CREST Decision

319th meeting, 18 April 2008

The third cycle CREST OMC 3% Working Group on "R&D in se

fact-finding mission and its assessment on research activities in

The working group provides suggestions and recommendations on

service sector with research-related policy measures. The reimportance of the service sector and service activities in the Eur

the essential role R&D can play for the improvement of the performance and its innovative capacity. At the moment th

increasing policy attention on global scale, as countries are str

economic development through innovation and growth in service

take action at European scale that will move forward resear

produce knowledge for policy development. As a result,

Associated States will be more able to mobilise the full innovat

services and its technologies.

The CREST working group on "R&D in Services" has produced

that support the following conclusions and CREST decides to:

1. To encourage Finland to make a proposal for the continwork, e.g. a proposal for an OMC NET, in order to devel

activity between Member States as well as Assoc

experiences of research and policy development in servi

States and Associated Countries will present their activitie

other interested countries. In addition new developments

be assessed.

2. To encourage CREST Members to explore joint researchMember States and/or Associated Countries in ERANe

order to stimulate research and innovation in servicconnection with technological oriented R&D in service

sciences and service engineering.

3. To invite Member States and Associated Countries universities and public research institutes to explore


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5. To invite the Commission to explore in the context of thethe financial perspective an expansion of research activit

context of FP7 as well as a more a comprehensive aresearch in the forthcoming FP8 on subjects proposed in

by the Working Group.


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Table of Contents

1 Overview

2 Introduction

3 Characterising services and R&D in services

3.1 Services are integral part of the economy

3.2 Globalisation of service markets

3.3 Service industries and business services

3.4 Service occupations

3.5 Service activities

3.6 Major components of the services sector

4 R&D in services statistical overview

4.1.1 The concept of R&D in services needs further clarificatio

4.1.2 The definitions of R&D and innovation

4.2 Concluding comments on statistics and conceptual definitions relaservices

5 Recent research reports addressing R&D in Services

5.1 Towards a European strategy in support of innovation in services: issues for future actions

5.2 Fostering Innovation in Services

5.3 Reneser report

5.4 The future of R&D in services: implications for EU research and ireport

5.5 Innovation and Knowledge-Intensive Service Activities

5.6 Promoting innovation in services

5.7 Measuring Service-Sector Research and Development

5.8 The competitiveness of business-related services and their contribu performance of European enterprises

5.9 Concluding comments on R&D in service

6 Policy survey mapping the public support measures for the R

6.1 How R&D in services has been addressed in participant countries?

6.2 Policy measures targeting R&D in services

6.3 Programme development for R&D in services


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1 Overview

The task of the CREST OMC 3% Working Group R&D in s

promote the R&D in service sector by exchanging informati

practices and developing policy recommendations. The participan

Denmark, Finland (chair), Germany, Greece, Iceland, Luxembourg, Norway, Sweden, Switzerland, Turkey and the U

work programme consisted of the following elements:

A review of existing literature and data bases

Survey of policy measures targeting the R&D in servicparticipating countries

Case studies highlighting the practices and development needsin multinational and domestic enterprises representing a

industries (key findings are included in this report, separate docase studies)

Synthesis and policy implications for the promotion of R&D i

The CREST OMC 3 % Working Group R&D in services started

January 2007 and its work was completed by the end of 2007.

Chapters two and three of this report provide an introduction to taround R&D and innovation in services, as well as a statistical

Even if the R&D in services is still relatively unknown issue, theactivities is highlighted in many ways. For instance, the em

indicate that around 80 per cent of science and technology jobs arThe concept of service can refer to a number of different thin

sector, occupation, activity, or an organisation. Such a multitud

common reason for some confusion and a challenge for any a

However, the Working Group took this challenge and addreconcepts such as the definition of the R&D and innovation

moment, there is not a widely accepted definition that would cov

activities in services, and this causes many kinds of problems. On

holding back the development of reliable statistics and also thservices is suffering from the lack of suitable official defini


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together analytical summaries of latest articles on the R&Dservices.

Chapter 5 presents an overview of the policies that have releva

services. Most Member States recognise services sector as an R&

services can benefit from the available R&D supports but these

technology oriented. There are also some measures that are

explicitly. Greece has specific calls for services within

programmes. Finland, Germany, Ireland, Norway and Sweden respecific development target. These countries have been active in d

and instruments for supporting R&D in services. The rest of thcarrying a varying range of activities that seek to address services

directly or indirectly. R&D in services is an issue of int

developments in the area are being monitored. Policy response

approach in the Member States. Those who favour more han

adopting this also in the case of service related R&D support.

favour more direct interventions tend to use them also in the ca

supports.

Chapter six synthesizes the key results from the case studies th

part of the project. These case studies are highlighting the real li

related to R&D in services in a range of different types of service

nine countries conducted 15 case studies that analysed a wide var

presented in the Exhibit 10. The study covers a broad range o

different sizes of services businesses ranging from constructio

consulting, covering technology based (e.g. software) services aservices (e.g., retail trade). Full business case reports are pres

report that complements this paper.

Chapter seven presents the key policy implications of the CREST

Group of R&D in Services. Policy makers have increasingly r

economic importance of services and there is a growing interest

that address services. A number of major EU - level initiativelaunched in this area. These include such topics as innovation

markets, and the support for service business development.

Member State level there are several programmes aimed in the ab

the renewal of public sector services. So far, there are only f

specifically targeting R&D in services. Still, it is clear that th


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2 IntroductionThis document represents a partial contribution to the work carrie

R&D in services Working Group. The overall aim of the W

advance the use of R&D in service sector by exchanging info

good practices and developing policy measures and recommen

countries have participated the R&D in services Working Gparticipant countries include: Belgium, Denmark, Finland, Germa

Ireland, Lithuania, Luxembourg, Norway, Sweden, SwitzerlanUnited Kingdom. The programme of the CREST Working

following elements that are reflected in the chapters of this paper:

1. A review of existing literature and databases

2. Survey of policy measures targeting the R&D in servic

participating countries

3. Case studies highlighting the practices and developmen

services in multinational enterprises

4. Synthesis and policy implications for the promotion of R&D

Tasks 1 and 2 were carried out by mid 2007, while case studies

been completed during the second half of the year. As a wh

together latest research findings, brief statistical note, review of s

developments in participating countries plus a synthesis as the fin

The following sections of this paper will firstdiscuss briefly t

from a number of different perspectives, highlighting some

attached to this concept. In the second section some statistica

development needs will be addressed. In the thirdpart a numbereports and their key findings will be briefly reviewed. The final

report part will present a brief synthesis of the results for further d

For some years already, policy and research communities h

attention to services. As a result, the research-based knowled

accumulated. At present, it is widely accepted that services repre

the economic growth. A clear message comes through from th

R&D and innovation in services are necessary for the growth a


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Better understanding of the concepts of R&D and innovation i

This type of findings are discussed in a number of reviewed repoimportant it is to develop a common language and concepts inrelated R&D and innovation. This clearly is one key task of t

Working Group as it is seeking exchange knowledge and good pra


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3 Characterising services and R&D in servicesAs a concept service can refer to a number of different things suc

occupation, activity, or an organisation. Such a multitude of me

reason for some confusion as different parties come together and

on services. All of the above-mentioned perspectives are more or

to R&D in services, another important notion in the contextfollowing sections draw on the work by Bryson et al., (2004)

different perspectives to the concept of service.

3.1 Services are integral part of the economy

To start with is important to recognise the ubiquitous naturedeveloped economies. Fundamentally all economies represe

production that transforms raw materials into something that has

created can be tangible such as airplane, or intangibles like a co

production processes have developed into a very complex pr

highly elaborate division of labour. As a result, production of se

now highly intertwined. It is almost impossible to draw c

production of tangible goods and services. For instance, car ind

amount of services when a new automobile is being designed

production process of a car a wide range of different types o

consumed and the production would not function without servi

completed car is sold to a consumer who will use many types of scycle of the automobile, before the final service will recycle mos

The afore-mentioned implies that R&D in services is not an typically very closely related to technologies and production p

goods.

3.2 Globalisation of service markets

Many of the traditional services need to be delivered locally so consumer are in the same location. This applies to most traditio

health care and elderly care. The recent development is that even

services are becoming increasingly global as a result of the incre

and technological advances. For instance, in many European co

h f h h l h i i d li d b i i Th


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services context. Without sufficient IP protection, investments inot yield sufficient returns. This may be a serious disincentive f

There is an urgent need to develop IP protection in the service co

3.3 Service industries and business services

Bryson et al., (2004) introduce a range of relevant perspectives

from service occupations to service economy. Service industries c

in which the final commodity is in some ways intangible or imm

within service industries typically include tasks related the pro

goods as well as services. Business services are those services thother businesses in the pursuance of their own activities4. Th

include services that are purchased for resale. Examples of busine

the auditing of accounts by an accountant, the preparation of b

architect, or the cleaning of business premises. Businesses offerinalong with many others, classified to NACE section which cover

and business activities5. There are other business services whic

part ofin-house service activities. A business may employ personnel rather than making use of specialist enterprises or m

research and development. Changes over the past 30 or so y

industry, have led to many such in-house activities being c

services outsourcing and offshoringhas taken place because

service suppliers can offer services more cheaply, and often their

be better as well. This allows for increased efficiency in the ent

services and allows them more flexibility when changes need to

to changes in the market. This enables them to expand or contracthey provided their own business services in-house. The increase

has contributed to an apparent decline in the fortunes of in

contributed to a growth in the business services.

3.4 Service occupations

Service occupations are forms of work that are not directly, buinvolved in the production of physical goods. These occupat

knowledge intensive jobs as well as more traditional services, so

high-level manual skills while other manual services are based on

labour. According to Eurostat 80 per cent of Science and Techno

in the services sectors.6 Service industries covered in thes


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3.5 Service activities

Service functions/activities are taking place across the industrifirms, networks and value chains. They refer to tasks that are

connection with productive processes and consumption of both

Typical examples of knowledge intensive service activities (KIS

and development (R&D), management consulting, ICT servic

management and employment services, legal services (including accounting, financing, and marketing-related service activities. M

public sector organisations make use of such KISA in their daily

they provide them internally and/or outsource them from exterprivate or public sectors7.From the policy perspective, securing tabove type KISA is an important issue. At the same time it is e

promote the utilisation of KISA in the public and private especially by the SMEs.

3.6 Major components of the services sector

Major components of the services sector include the following t

listed in the table below in the Exhibit 1. However, all services d

somewhat problematic. For instance many manufacturing i

significant number of service employees. Further on, many manindustries make a significant share of their turnover from services

some typical R&D activities related to each type of services. Alno means comprehensive it is obvious that service industries rel

interdisciplinary in nature including very practice oriented rresearch close to basic science. All this come on top of the very h

of service sector itself, and further emphasizes the need for s

service related R&D.


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Exhibit 1 Main elements of the service sector and some ty

activities

Type the service Typical R&D activities

Finance, insurance and real estate industries

Commercial and investment banking, insurance,

and commercial and residential real estateindustries

Insurance and financial m

development for the backservice scripts developmepersonnel

Business services, legal services

Legal services, advertising, engineering andarchitecture, public relations, accounting, R&Dand consulting

Creative design, socio-eco

research, technical sciencmanagement research, m

Transportation and communications

Electronic media, trucking, shipping, railroads,

airlines and local transportation such as busesand taxis

ICT research and develop

simulation, technical scienmanagement, planning anresearch, management redevelopment, marketing a

research

Wholesale and retail trade

Intermediaries between producers and

consumers, restaurants, personal services,repair and maintenance services

Socio-economic research

behaviour, logistics, shop purchasing management,marketing research, systesimulation

Entertainment, hotel and motels

Comprise elements of tourism, the worldslargest industry

Socio-economic research

environmental research, c

management research, fo

Government services at the transnational,national, and local levels.

Public servants, armed forces, education, healthcare, police, fire departments.

Economics, politics-, and economic research, securdevelopment, planning, m

research, gerontology, deenvironmental and energy

Not for profit agencies

charities, churches, museums, private not forprofit health care agencies

Socio-economic researchdemographics research, r

research, medical researc

Adapted from: Bryson, J. Daniels, P. and Warf, B. (2004), Service Worlds PeoTechnologies, pp. 1-11, Routledge, London.


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4 R&D in services statistical overview

Increased interest in services has motivated improvements in s

statistics. Although services R&D statistics have improved, many

remain. The following section will first present some key st

discussion on the development needs in services R&D statistics. T

be recognised that R&D is only one, albeit important, meperformance. Other measures have been developed using patent

surveys. Unlike some other innovation indicators, R&D measuoutput. Further on, traditional R&D is a measure of technological

not capture non-technological aspects. For example, UK innova

that R&D accounts for around 40% of all innovation expenditu

R&D in services is increasing rapidly, although on average it stil

the average R&D spending in the manufacturing. The followin

the Reneser report, (2007), illustrates some key development tre

services9. Exhibit 2 shows striking differences between the avera

services and manufacturing in a number of countries. Manufachieving a R&D intensity of at least 2%, but frequently 4% and a

given the economic weight of the service sector in the European

is to achieve its Lisbon agenda target of increasing R&D as a

added to approach 3% by 2010 then raising the R&D intensity

sectors is of fundamental importance.

Exhibit 2 R&D intensity of the services and the manufact


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Source: Source: OECD ANBERD except Austria, Greece, Italy, Portugal and United sta

Rem: Australia, Japan and Sweden 2003, Turkey 2002.

Exhibit 3 Share of manufacturing and Non manufacturin

Business 2004, Selected OECD Countries

Source: Source: OECD ANBERD except Austria, Greece, Italy, Portugal and United sta

Rem: Australia, Japan and Sweden 2003, Turkey 2002.

Exhibit 3 illustrates the breakdown between manufacturing and

related R&D. Interestingly, the leading countries in terms of non

include Slovak Republic, Portugal and Australia. All countries wh

of business related R&D is rather low. At the same time, counlevel of manufacturing R&D, like Korea, Germany, and Japan

share of non-manufacturing R&D. This may reflect their signifmanufacturing R&D, rather than very low spending on non-m

Similar type of pattern has been presented in earlier US studies andata

10.


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Exhibit 4 Real Growth Rates of Business Expenditure in S

Manufacturing on R&D as a share of GDP, 198

So

The importance of services R&D for the economic growth is al

growth rate. For instance, Ireland and Austria show around 30 rate in the services R&D between 1987-1999. Although the start

growth rate of services R&D is higher rate than the R&D grow

context. This applies to most countries except the UK and Finlan

and manufacturing R&D have the same growth rate.


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Exhibit 5 provides another interesting view to the discussion by sbusiness R&D in the services sector. The outcome of the table pr

comparison to the Exhibit 4, in terms of country performances. Asuch new member states as Latvia and Slovakia are the two le

Japan the least spending country in this type of services R&D st

statistics on services R&D are much more patchy than the m

R&D statistics. The coverage of service R&D statistics is one t

even more serious problem, is related to the way services relate

The indications are that much of the services related R&D is infwithout ever being recorded within the business nor in the statistic

Exhibit 5 Share of Business Expenditure on R&D in the s

and 2002

Sou

4 1 1 The concept of R&D in services needs further clarification


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design, prototype testing, and manufacturing process desigproduction) does not fit well when services are built on unique

continually customized, incorporating incremental improvemediscrete new product models or software versions). In addition

activities, service-sector R&D is also inherently more difficu

example, R&D can be carried out in formal R&D department

nature carried out in facilities where R&D is not the main activ

innovations are more likely to be customer driven, related R&

typically integrated into user companies business units. There istand-alone R&D facility or division in which R&D activi

quantified by existing accounting systems.

Service innovation is more likely to be carried out in a multidisci

that combines IT system integrators, managers, and market rese

more responsibility on the organization to determine what sha

expenditures is to be classified as R&D when completing the su

business units composed of teams of multidisciplinary staff, it

individual staff members supporting innovation in the service secresponsibilities and functions. For example, IT managers neimprove their networks and systems11.

Further on, the distinction between the manufacturing and service

increasingly blurred. For example, in some industries, a significa

reported under service-sector statistical codes is product/produc

outsourced from traditional manufacturing sectors. Also literature

where manufacturing firms increasingly providing services aconducting service-related R&D activities. This industry mis

driven by the unavoidable need to aggregate R&D to the establis

to uncertainty in trends for R&D activities targeted at service inntargeted at advancing the provision and content of services). S

tackle misclassification issues have had little success at quantif

aggregate R&D statistics used for policy analysis. As a result

potentially important distinction between R&D expenditures ta

manufacturing vs. service activities across all sectors of the econo

4.1.2 The definitions of R&D and innovation

As the US report points out current institutional definition


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Many of the existing problems can be rooted to the concepts of Rin services that are multidimensional and complex in nature. Fo

recent Oslo manual (2005: 53) provides guidelines for distinguiof innovations, service related included.

With respect to services, however, it may be less clear, as the product

and consumption of many services can occur at the same time. Some d

guidelines are:

- If the innovation involves new or significantly improved characterist

service offered to customers, it is a product innovation.

- If the innovation involves new or significantly improved methods, eq

and/or skills used to perform the service, it is a process innovation.- If the innovation involves significant improvements in both the chara

the service offered and in the methods, equipment and/or skills used

service, it is both a product and a process innovation.

While the multidimensional characteristic of service innovation

in the key documents, service related R&D is a more problemati

Manual (2002:30) definition of R&D12 covers three activities: ba

research and experimental development. The manual also lists a be excluded from R&D. Interestingly, many of the activities tha

in the services R&D, are excluded from the official R&D defiFour broad groups of activities are related to R&D but should no

R&D surveys13.

Education and training

Other related scientific and technological activities Other industrial activities

Administration and other supporting activities

Yet, at the same time similar type are activities are listed in

elements of service innovation. For instance, excluded activitieand training which are important elements of R&D in knowled

firms. Complete list of activities excluded from the R&D are pres

12 Research and experimental development (R&D) comprise creative

systematic basis in order to increase the stock of knowledge inclu


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Education and trainingof personnel in the natural scmedicine, agriculture, the social sciences and the humanitie

special institutions of higher and post-secondary education sho Other innovation activities defined as all those scientific, te

and financial steps, other than R&D, necessary for the imple

improved products or services and the commercial use o

processes.

Other industrial activities include acquisition of technoloindustrial engineering, industrial design and other capital acstart-up and marketing for new and improved products.

Production and related technical activities including distribservices and the various allied technical services, together w

using social science disciplines, such as market research14.

Based on the above discussion it can be said that institutional de

further developed. From the business and policy perspectiv

appropriate if the R&D and innovation concepts could be harm

would provide a sounder basis for the development of statisticaservice related research.

4.2 Concluding comments on statistics and conceptual deR&D in services

The previous sections have illustrated that the statistical coverage

is gradually improving but many challenges still lie ahead. Thesthe heterogeneous nature of service industries, service activities

industries, as well as the very nature of R&D in services. There i

that provide more complete picture on R&D in services and work

that indicators will reflect the full spectrum of relevant activitie

needs to be done across the countries which represent different sta

of the R&D itself, as well as the quality and coverage of relevant

R&D in services is still relatively unknown issue, the importance

highlighted by the employment statistics which indicate that 80and technology jobs are in services sectors.

Statistics offices alone cannot improve the quality of the s

businesses need to be better able to both recognise and report


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5 Recent research reports addressing R&D in Se

The following sections will present key findings extracted from

reports addressing R&D in services. The aim of this chapter is to

issues and themes that keep coming up in the research. One a

services report is to highlight some underlying processes that

research findings. Such deeper understanding is fundamental elsharing and development in the area.

5.1 Towards a European strategy in support of innovatioChallenges and key issues for future actions

This Staff Working Document responds to the request of the Eur

sets out, for the first time, elements of a policy framework aiminginnovation in services, taking into account the report of an Exp

section 4.2) that was set up in its preparation. It was initiated

innovation strategy: strategic priorities for innovation action at on the 4. December 200615. This document invites the Commi

April 2007 an overall assessment on innovation in services, evalu

needs for policy adjustments, where appropriate. The Commissi

take into account the various forms of non-technological innovati

recognises the work of CREST Working Group on Services R&

importance of the policy implications provided by the group.

Conclusions and policy implications

The future challenges and key issues to be addressed in defining

in support of innovation in services can be summarised in the foll

First, building upon the results of the Community Innovation is a need to better understand the specific innovation patterns

relevance for innovation policy strategies. Work to improbetter capture the specificities of service innovation needs to c

Second, the internal market for services needs to be further implementation of the Services Directive will lower barriers

and stimulate new forms of service innovations.


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Fifth, innovation in services depends critically on the right smanagement capabilities, which need to be better identified

levels. Sixth, R&D and innovation programmes need to be bett

specific requirements of service innovation. Innovation in se

by technological research projects than by organisational

business models. This should be better reflected in research

by developing new forms of knowledge transfer from rese

community, taking into account the recommendations of th

Group on R&D in Services.

Seventh, it is not enough just to open existing innovation services. More emphasis should be given to the specific ne

innovative firms in the service sector. This requires new

services, bringing together different business support s

transfer, incubation, finance) in a more consistent and less bur

Eighth, the Commission will support under the CompetitiveProgramme the development and testing of new tools and in

of innovation in services that follow a more integrated apbureaucratic than existing support mechanisms, with a view

will be used and implemented on a large scale by regional, na

service providers.

Ninth, in defining and implementing new ways of suppservices, Member States should work closely together and le

Scope for transnational cooperation in this field exists, painformation about future trends and developing new tools

support of innovation in services.

Tenth, innovation in services is an important pillar of the Liaims at supporting all forms of innovation in the best possible

The Commissions services will improve the collection of info

policy initiatives and facilitate the identification and further di

practice in this field. These orientations will be furtherCommissions services as a matter of priority and implemented a

strategy. To be effective, these priorities need to be supstrengthened by complementary efforts at regional and national le

5 2 Fostering Innovation in Services


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Conclusions

Services play a major role in European member states in termdevelopment. Majority of jobs, GDP and productivity growth activities.

Services are becoming more R&D intensive and the significathe performance is now recognised. Thus, services other

peculiar sectors of telecommunications and computer sassumed not to engage in R&D.

There is significant growth in R&D in services but it remextent this reflects real growth, or a growing recognition by

(and the responding firms) that services engage in R&D.

Service innovation is often closely linked to changes intechnological innovative processes, organisational arrangemen

Service firms closely ally investments in innovation wittraining and skills based provision.

Services and service innovation remain difficult to study and c

It is important to develop new indicators that can better artwhat service innovation is about.

Policy implications

The report lists a broad range of policies that can support service i

Horizontal framework policies including:

Legal and regulatory frameworks The knowledge base

Entrepreneurship and finance

Demand-side policies, including public procurement

Specific policy actions include proposals for:

European Innovation Platform for Start-Ups in Knowledge

European Service Innovation Institute

Innovation Service Exchange Network and, support for thigh risk, innovative service products.

Policy recommendations that are most closely related to services R


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Further on, developments in, for example, genomics,ambient intelligence and locational technologies will hav

in services Research networks and programmes should also be evalu

well services were integrated into them and to what extend

will arise from them.

Measures that initiate better innovation networking links for s

For instance, innovation voucher scheme specifically businesses is an example of a measure that can link se

institutes (e.g. in Netherlands; Innovation Vouchers for SM

5.3 Reneser report

In 2005 RENESER project was established by the EuropeanInternal Markets and Services17. The study was operationalised

embraced literature review and secondary statistical analysis, and

the development of 21 detailed case studies in selected segm

industries. The RENESER study deals with the Research and devbusiness-related Services. It focused on two key issues:

- the underinvestment on firms in R&D and- the degree to what public R&D expenditure is satisfactory

R&D needs of service firms.

Conclusions:

- Some service firms do perform classic technological RR&D performed by others.

- Services R&D is widely underestimated (large amounthidden behind labels such as business development, s

etc.).

- Leading edge firms show attention to management of

service innovation activities.- Most service firms are poorly linked to the science base

R&D programmes. This results in that innovative service

to receive public innovation support than are their manufa

- There is clearly room to go beyond the market failure al d t j tif li i t ti ( d


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- Identifying and promoting best practice.- Promoting skills, business models and voluntary stan

innovation in services.- Screening of relevant Commission policies to assess service innovation.

5.4 The future of R&D in services: implications for EU rinnovation policy -report

The Science and Technology Foresight Unit of the DG Resea

project: The future of R&D in services: implications for EU resepolicy18. The final report was published in 2006. The report exam

- the prospects for growth in services R&D and;- discusses the question of how R&D is being measured in s

The study first reviews the general literatures on services sec

R&D, complemented by discussions and commentary by researcof the research is based on interviews and workshops with practit

range of service industries.

The key conclusions of the study include the following ones:

There are many problems with measuring services R&D. Ththe analysis likely to underestimate a good deal of the R

undertaken in services. Measuring problems would also leadthe size of the US-EU gap in terms of service related R&D

Even so, R&D as conventionally understood appears to be lowthan in comparable manufacturing firms. Similarly, there doe

going tendency for the US services sector to undertake m

equivalents

Services R&D as conventionally understood is likely to incr

and relatively, and appears to be a promising target for policy However, there are dangers in putting too much emphasis on

There are other innovative activities that are also important. Tdeserving of policy and management attention, and overemph

notion of R&D) might skew innovation in suboptimal directio


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Sector-neutral R&D and innovation policies seem to havservices than could be expected. It may be that networks be

and civil servants, public research institutions, and privadeveloped for manufacturing (and a few high-tech servi

services.

More general conclusion is that services are often lessinnovation systems than are firms in other sectors. Effo

innovation networks for services (and to use existing pro

networks as vectors for innovation) could be important for

and R&D in these sectors.

There have been few instances of policies aimed specificallyinnovation Germany is the main exception within the EU,

innovation and service R&D programmes. But there is grow

issues, for instance in the Nordic countries. Analysis of

experiences of such programmes would be a good basis

elsewhere.

5.5 Innovation and Knowledge-Intensive Service Activiti

The OECD Directorate for Science, Technology and Industry c

country research project on the role of service activities

innovation. The final synthesis report was published in 200619. T

the value of KISA in facilitating the growth of innovation capaorganisations by focusing not on service sector industries per se

knowledge-intensive services as carriers and sources of knowled

performance of individual organisations, value chains and clustFrom this perspective, the impact of services on innovat

understood through their specific functional role rather than

industry sectors.

The study reviews the general literatures on services, inno

innovation, complemented by discussion within the Group of ex

of the research is based on interviews, surveys and statistical atypes of industries: software industry, health care, tourism and l

based industries (related to traditional manufacturing).

Some key findings of the study


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Effective management of human resources, such as employbuild up their knowledge base and absorptive capacity; formi

research teams that broaden the knowledge base required in smaking use of personal connections with industry and other ex

Establishment of appropriate organisational structures, sdedicated business units that scan the environment and develo

business; acquiring firms that can bring in new knowl

thinking; and establishing joint ventures that typically (e.g. w

firms) institutionalise co-operation and integration of KISA w

Forging effective networks and linkages, such as by partic

which offer opportunities for incorporating internal and eengaging in close co-operation with suppliers and setting u

projects; working closely with customers in new solution

establishing joint projects with research.

Employing market-based transactions, such as buying integrbundles that bring external KISA within the firm; using outs

integrate former internal KISA with the external expert

services from service providers businesses and working with t

Knowledge intensive service activities have several different func

innovation:

Renewal service activities such as R&D services and manaare most closely related to innovation

Routine services such as accounting - contribute the improvand management of various subsystems within organisations

Compliance services such as auditing and some legorganisations to work within the legal framework and various

Network services e.g. informal personal networks and profacilitate communication, knowledge exchange and flexible re

Policy implications

Fostering the supply, quality and demand for KISA, to

performance, will be the challenge for innovation policy. Polic

actors directly or indirectly through intermediary organisationframework conditions including government regulation, ed


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A key challenge is improving access to KISA. This challenintangibility, complexity and difficulties in assessing the qual

the services offered prior to engaging with them. Financial partial solution. Awareness of KISA needs to be developed

asymmetries between KISA suppliers and users need to be add

Policy must adapt to changing needs for KISA. The need findustries, organisations and innovations mature. The life cyc

organization and of the innovation process itself can be used

type of KISA best facilitates further development. At dif

innovation life cycle, the balance between internal and exter

change, implying a need for different types of policy measures

5.6 Promoting innovation in services

This project is part of the OECD horizontal project on Enhancing

the Service Sector. The report was published by the Committe

Technological Policy (CSTP) in April 200520

. It draws on ex

recent innovation surveys, and a policy questionnaire circulatedelegates to characterise innovation in service sector industries

measures being implemented in OECD countries to improve inno

Research findings

The service sector is of growing importance in OECD economies

supports the notion that services are increasingly knowledge-ba

drivers of growth. Service-sector firms in general are less likemanufacturing firms, but they are becoming more innovativ

intensive, and services such as financial intermediation and bus

above-average levels of innovation.

In spite of the fact that the service sector relies less on Rservice-sector investments in R&D appear to be rising. Betw

service-sector R&D increased at an average annual rate of member countries, compared to approximately 3% in manufac

Large differences between growth rates in services and manpronounced in countries such as France, Germany, Japan, Ne

the United States.

Whil i i l h i f h id h i


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R&D spending as a share of value added (R&D intensity)considerably below that in manufacturing. However, availab

that R&D intensity in services has increased quickly in mcountries even in many in which manufacturing R&D intensit

Business services and post and telecommunications, and cservices in particular, account for most of the growth in R&

last decade In Germany, Korea, Netherlands and Portugal. R

computer and related services industry increased more tha

recent years, and the Korean R&D service sector has seen in

of 75% a year. This highlights the fact that service-

considerably across industries, as is also the case in manufactu

Policy implications

Service sector requires attention to a number of policy areas, wit

than for manufacturing as listed below:

Service-sector innovation derives less from investments in formore extensively on acquisition of knowledge from outsacquired through purchases of equipment and intellectual pro

collaboration.

Human resource development is especially important to servihigh reliance on highly skilled and highly educated workers, athat a lack of highly skilled personnel is a major impediment t

in most OECD economies.

The role of newly established firms in innovative activity ithan in manufacturing, so that entrepreneurship is also a k

innovation. Nonetheless, small firms tend to be less innovative

IPR protection has also drawn considerable attention, espsoftware and business method patents, which seem to h

innovation in services.

5.7 Measuring Service-Sector Research and Developmen

The US. National Science Foundation (NSF) and National Inst

Technology (NIST) commissioned a project to investigate R&D i

report, Measuring Service-Sector Research and Development


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Research results

The U.S. service sector is the largest sector in the economy increasingly significant share of gross domestic product (Grevenues in the United States account for about one-thi

revenues worldwide.

Service-sector industries are characterized by a close production and consumption, high information content, thetheir output, and a heavy emphasis on labour capital in t

output.

It is widely accepted that a significant share of R&Dmanufacturing sectors supports the provision of products and

the non-manufacturing sectors. Service-sector industries in

information technology provides a prime example of this.

Service sectors share of R&D varies greatly across OECDextent, these cross-country differences highlight the difficu

measuring, and classifying R&D expenditures in the service

are further complicated by the background of individuals comand the diversity of business lines within modern evolving cor

In addition to identifying R&D activities, service-sector R&more difficult to measure. R&D can be carried out in formal R

in an informal nature carried out in facilities where R&D is no

Service innovations are more likely to be customer driveactivities are typically integrated into user companies busines

likely to be a stand-alone R&D facility or division in which Rreadily quantified by existing accounting systems.

Current institutional definitions of R&D are not completelservice sector. The definition of which service activities f

classification may not accurately or fully capture service-secto

The distinction between the manufacturing and service sincreasingly blurred. In some industries, a significant share o

under service-sector NAICS codes is product/producti

outsourced from traditional manufacturing sectors.

Manufacturing firms are increasingly providing services anservice-related R&D activities.

Service sector is an extremely diverse set of industries. Itaccess and integrate technology with the goal of develo


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5.8 The competitiveness of business-related services and contribution to the performance of European enterpr

This Communication contains an economic analysis of the rol

European economy23 and examines their competitiveness, se

importance in the overall EU economy and to signal the Commi

to improve their framework conditions, in line with the 2002

Industrial Policy in an Enlarged Europe. This Communication

Services clearly recognises the importance of R&D for servichighlighted as follows:

Conclusion

The involvement of services companies in the national a

Programmes should be improved to address their specific probl

EU target of devoting 3 % of GDP to research and development

to achieve, if the business-related services sector plays a larger

overall economic weight.

5.9 Concluding comments on R&D in service

The objective of this chapter has been to bring together insi

research, statistics and key concepts related to the R&D in serv

achieved by reviewing seven recently published papers that discu

R&D in services point of view. The following sections present a r

and policy issues in the afore-mentioned areas.

Services are an integral part of the economy and highmanufacturing activities. Hence R&D in services has its spec

not an isolated function. On the contrary, it is closely related

production processes of physical goods. This implies that R&

based on thorough understanding of the service concept, re

linkages to the wider national and international economic con

Services linkages to the wider socio-economic context m policy perspective and policy coordination have importan

development. Following the broad based policy approach (

least the following type policy measures can be identified: R&

businesses and R&D workers targeting of university funding


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has already been updated to cover service innovations featlogical to proceed to the same direction with the R&D definiti

Service sector holds within it an enormous variety of activities.26

in the R&D in services so that it ranges from close to market dev

basic research. The best way to improve our understanding of

services related R&D is to carry out empirical investigations acro

of services. Both qualitative- and statistical analysis is requi

explorative research field. Once the knowledge on the R&D in se

provides a solid basis for better policy design, and targeting of th

policy measures.

One very vocal message from the reviewed literature is that mo

on service R&D would benefit research and policy development.of reasons why R&D in services is a challenging area for statistic

following ones:

statistical surveys tend to be biased towards industrial R&D and questionnaire design

institutional definition of R&D does not capture all forms of s

service businesses themselves do not always realise that R&D, and hence they are not reporting their activities

much of the R&D in services is hidden since it is often: incarried out partly by suppliers, individuals, or in client firms f

There is a good reason to believe that statistical coverage of R

improve in the near future. Industry classification systems

sensitive to services and more refined codes for services are be

(see Appendix 1). For instance, Statistical Classification of Econo

European Community, (NACE; 200727), and North American In

System (NAICS; 200728) have been recently updated and they

basis for more accurate statistical analysis on services. Ke

classifications up to date requires constant updates that reflecteconomy. As a result of the above-mentioned updates, service

represented in the most recent industry classifications.


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6 Policy survey mapping the public support mea

R&D in services

This chapter presents the results from the survey of policy measu

in services. The Working Group organised this survey that produ

on the currently implemented policies relevant for the R&D in S

of the survey complement the literature review and case analy

further contributions to the final report. The topic, R&D in serv

the following issues have been identified as areas that needs to be

Statistics on new service development (R&D) activities arfurther improvements are needed since current picture is incom

R&D definition covers only part of the new service developm

Businesses may not be reporting all of their service developmR&D surveys

R&D in services is more informal, or, less organised than indualways easy to identify existing service development activities

Often new service development involves incremental impeasily escape the attention even within the developer organisa

Further on, discussion on new service development should be

more distinct when the research is concerning services in a morwhen the question is on research and development that is dir

service development. While all research benefits new service devthe actual new service development is directly targeting the deve

improved services. Working Group participants have raised

important issues related to services R&D. These include:

- Which other key enabling technologies are there besides I- SMEs importance in services sector, how is this reflected

related policies?- National and EU level targets for R&D and collaborative Rin the case of services R&D in particular

- Services and R&D related definitions need to be further cl- How to secure the visibility and R&D policy attention to t

H ti th i ti f di i t t i th


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Natural hazards

Ireland* Financial services

Software / Computer related

Food, Drink & Tobacco

Computer related services

Communications

Engineering and technical

services

Financial services

Healthcare, Fina

Professional / Bu

Utilities, Personaretail trade, Leis

property.

Lithuania Industrial services,

Retail trade,

Tourism

Health services,

ICT services

Industrial service

ICT services

Luxembour

g*

Multimedia

Telecom

Software

Financial Sector (Finance &

Insurances)

Software

Multimedia

TelecomLogistics

Health Care

KIBS

Norway* ICT related services, Financial and bu

industrial service

Norway export s

drilling, engineer

business service

Sweden ICT

Telecom

Logistics

Wholesale & retail

Public transport

ICT/Telecom (focus on Mobile

services)

the New Service Economy

(horizontal program focusing on

new service development)

Health care and health

promotion

Innovation research

Public e-services

Tourism & travel

Healthcare

Household servi

gardening, carpe

Turkey ICT services

Financial services,

Logistics related services,

Tourism related services.

Insurance and retirement

related services.

Information and communication

technologies,

Financial services

Tourism related

Education relate

E-Government

United

Kingdom

Computer related services

Post andtelecommunications

Miscellaneous business

R&D services

Wholesale and retail trade


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In addition to ICT, knowledge intensive services such as softwarefinancial services and creative industries have been a target for

measures. Further on, several participant countries have targeted s

for health care services. Public sector service provision has signif

of health care services in most countries, and hence public sect

direct role also in carrying out R&D activities. Overall, partic

specified 2-5 areas that are seen as essential in terms of se

However, some of the specified areas are very wide, such as pu

some are more focused like tourism or wholesale and retail traderespondents have identified services that are important from som

high share of business R&D or policy support for R&D. Most ofhigh on the policy agenda for some other reason include: h

knowledge intensive business services and culture-/recreational s

represent services that are seen important because of their future

of potential bottlenecks, hence there is a need to address R&D in

As a policy area R&D in services is not always clearly designa

policy actor, or ministry. Participant countries report a wide ran

of key actors addressing R&D in services. Typically they includesuch areas as science & education, trade & industry, financing a

there are no policy actors devoted to promotion of R&D in ser

services have more or less pronounced role in the executive agen

regional development agencies and policy actors seem to have a

relation to services development.


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6.2 Policy measures targeting R&D in services

Reported R&D policies are typically sector neutral and ad

development or innovations in a wider sense. In principle, servicesupported but often programmes seem to portray some technolo

partly traced down to the long history of technology related R&

services one. As a result, support policies, programmes and agen

skills tend to be more advanced in the technology related R&D.

compiles together information on the most important policy m

respondents have reported.

Exhibit 7 Most important policy measures targeting servi

indirectly)

Equ

itysupport

Fiscalmeasures

Sup

portforpublicR&Danded

ucation

TrainingandmobilityofHR

Gra

ntsforindustrialR&D

Info

rmationbrokerage

Networking&collaborativeR&

D

Ded

icatedserviceR&Dprogra

mmes

Pro

grammesopenforservice

R&D

Use

ofICTandexistingtechno

logy

Pro

motionofKIBSfirms

Fac

ilitatingaccesstoKIBSuse

Servicedevelopmentinmanuf

acturing

4 6 8 5 6 4 4 3 5 5 4 2 5

Belgium x xFinland x x x x x x x x x x x XGermany x x x x x x XGreece x x x x x x x x xLithuania x x x x x x x XNorway x x x x x x x X

Sweden x x x x x x x XTurkey x x x x x x x x x X

UK x x x x x x

TOTAL 4 7 9 5 7 4 6 4 6 6 4 2 6


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new services (4). Other measures were also used but by lerespondents, see Exhibit 7 for measures used by 3 or less of the re

6.3 Programme development for R&D in services

This section will give a brief overview of the policy / progr

situation in those respondent countries that were able to produce

in time to be discussed in the Working Group meetings. W

respondents have already developed specific measures targeting s

other countries are still remaining cautious, relying on more ge

support.

6.3.1 Countries that have not adopted specific measures to target se

6.3.1.1 Belgium

At present Belgium does not have specific policy measures

services. However, the importance of R&D in services is progaccount by the different Belgian authorities. In the future the dev

on policy instruments that can offer a better support for R&D in service sectors are viewed as a priority by the Regional governm

Transport and logistic, ICT and health. In order to promote n

enterprises, governments are looking for measures designed to hof business services which are already developing rapidly in

important target is to increase venture capital available for sactivities.

6.3.1.2 Greece

Greece has not introduced specific support measures for services

are being addressed via specific calls within existing programme

the Greek RTD policy is the promotion of innovation in all sect

The emphasis is on the key sectors, which play a crucial role competitiveness of the Greek economy, and as drivers towar

economy. One could say that most of the RTD activities in the pe

large degree are directly or indirectly linked with RTD in servicehow effective all these programmes are in supporting R&D in serv


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6.3.1.4 Turkey

In Turkey the main emphasis of funding programmes is given t

industries and their risky R&D activities. However, the techncarried out for the service sector can be supported within a

programmes. The social and humanities studies related R&D

being funded under the TUBITAK programme.

6.3.1.5 United Kingdom

The existing UK policy measures are not explicitly targeting

However, all policies are sector neutral and thus open to firms opsector. The main policy measures in support of R&D are:

technology programme, and knowledge transfer partnerships

Government published the ten-year Science and Innovation Inv

which sets out a long-term vision for UK science and innovatio

ambition that public and private investment in R&D should reach

by 2014. The UK Government keeps the framework under

changes, R&D in services included.

6.3.2 Countries that have introduced specific measures to target ser

6.3.2.1 Finland

Finnish national R&D strategy has traditionally focused on the te

manufacturing industries and in the creation of new scientifiknowledge. In recent years, the Ministry of Trade and Industry

increasing role of service sector as part of the economy and itshas together with its agencies broadened the national R&D s

sensitive and appropriate for the encouragement of R&D inMajority of new actions and instruments on R&D and innovation

have been developed through Ministry's research funding ag

Finnish Funding Agency for Technology and Innovation.

Tekes runs several technology programmes that are targeting serv

being Finnwell Programme (health care), Serve Programme (In

B2B services), Tourism and Leisure Services programme and V

(value added mobile services) New service concepts an


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A service innovation needs to involve replicable elements thand systematically reproduced in other cases or environments

A service innovation is a service product or service process thtechnology or systematic method

The innovation does not necessarily relate to the novelty of but the innovation often lies in the non-technological areas. F

a new business model, new solutions in the customer interfa

methods, novel application of technology in the service pro

operation with the supply chain or new ways to organize and m

Overall, the development of innovative service concepts is a toand improving the performance and global competitiveness o

Studies of service innovations bring to the fore neglected aspec

process, widely distributed throughout the economy. In Serve p

focus is to encourage the development of innovative service c

business. The programme focuses upon B to B services in certain

Industrial services Knowledge intensive business services (KIBS)

Financing and insurance

Trade

Logistics

Real Estate Services

Asset Management Services

Serve Innovative Services programme supports Finnish com

organizations in development of innovative service concepts tha

or replicated and where some technology or systematic method iprogramme targets are to:

Increase the service product development capabilities in thespecially in professional services sector

Promote systematic development of customer oriented servicand medium-sized enterprises

Boost the development of new business models based on sedifferent sectors


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6.3.2.2 Germany

Since 1999 until 2006 the German Federal Ministry of Educatio

initiated diverse range of calls for research in the services area. Th policy measures has been the promotion of the tertiary seeconomy. The specific approach of the service R&D policy me

develop the innovation management, new fields of growth and to and cross sectional activities in the service sector.

Exhibit 8 Specific targets of service R&D programmes in

Innovation management area Targeted growth arDealing with knowledge Health Services

Cooperation management und virtual Companies Financial Services

Marketing and Customer Relation Facility Management

Procedures for designing Service provision(Service Engineering)

Handicraft, traditional s

Benchmarking Transfer and Cross

Export of Services (efficiency and excellence) Standardisation

Integration of product and services Public Awareness for rinnovation in the servic

The German Federal Governments service R&D support providsignificant investment in services development. It is based

approaches executed by two ministries. The German Federal M

and Research is in charge of service research, the German Minist

Technology is responsible for innovation and development of dif

economy, including services. There are also R&D activities Federal States (Lnder). However, this report will focus only to

the German Federal Government. The following will describ

specific policy measures by the Federal Ministry of Education and

In 1998, Germanys Federal Ministry of Education and Researchfirst service research programme, the funding priority Innova

laying a vital foundation for the broad based services developmen

most recent service development programme was officially launc

Earlier preparations towards this programme included two fundin

and internationalisation of services and Integration of produ

These activities involved some 150 projects, with total funding

million The project management was charge to the agency calle

ki i h h i h


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Promote networking with other economic sectors of the econo

Exhibit 9 Targeting and funding volumes of the German

Services programme

Innovative Services Programme

Duration Fun

Benchmarking in order to strengtheninnovation, growth and employment in theservices sector

1998-2004

Work organisation, management and

tertiarisation

1998-2004 2

Service engineering and service design 1999-2005 1

Standardisation and quality in the

services sector

1998-2004

Stimulation of development of innovativeservices in the crafts/trades sector

1999-2000

Service co-operation in the crafts/trades

sector

2001-2003

Knowledge-intensive services 2000-2006 3

In March 2006, the new service research programme Innovation

launched by the Federal Ministry of Education and Research. It h

70 million and a planned duration of 5 years. The programme wa

to continue the research funding and to correspond to

internationalisation, globalisation and competition by steadily

cycles. The main topics of the programme are:

Innovation management for services (development of mtechnology design for successful service innovations)

Innovation in growth sectors of the German economy (businefor elderly people)

C t R l ti hi M t


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Customer Relationship Management

Growing importance of Human Resources and Knowledge

6.3.2.3 Sweden

Sweden has launched specific programmes targeting services

perceived that innovation system did not address R&D in servic

service design and delivery can benefit from increased level o

services could deliver greater value for the customers and this growth of the sector. The key objective of the programmes

methods, standards, demonstration projects and new ways of comservice supplier and customers.

VINNOVA has launched a programme called Information

platform, to facilitate generic infrastructure innovations that can

management in services, open value chains in services, e-trust, se

for e-design. VINNOVA has also started series of general c

businesses that carry on research on innovations. This activity is

growth programme, and it is attracting increasing number oservice businesses. Another Swedish agency NUTEK has also

programme targeting e-business development by small firms. Oareas of service R&D actions by VINNOVA include:

Efficient product development

Industrial services in relation to manufacturing and product de

IT for product development and manufacturing Functional sales

Wood manufacturing for industrialised construction and interi

IT support services

services supporting new value chains

supporting knowledge based platform; Lean Wood Manu

City logistics:

Future sustainable retailing

Third part logistics

New logistic chains

E-services in public administration:

All relevant data is available regardless geography or o


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All relevant data is available regardless geography or opatient consents

The producers of services and devices are competent in secure medical diagnosis, effective therapy and relevant ca

Transport

Future Passenger Service

Market oriented public transport service research excellen

Elderly care

WINNCARE creating a sustainable new care system

Innovations for service society

6.4 R&D in services future issues

Survey respondents expressed some views on the future devesupport policies targeting R&D in services.

Belgium, Lithuania, Turkey and the United Kingdom represent

not introduces specific policy measures targeting R&D in scountries:

Belgium is increasingly paying attention to the importance of Rat present the main focus is on gaining better understand

features of R&D in services, and related indicators dev

European framework for state-aid is also monitored closely

that the directive on state aids may be a positive signal fo

targeting R&D in services. Lithuania is developing integrated national programme to im

of the R&D and competitiveness of the national economy. T

this programme is to create a chain where research and develo

create products and service for markets.

In Turkey service related R&D is funded under the programmes. In the near future two new programmes will b

these new programmes, SME funding program, as well Innovation Based Entrepreneurship programme can support R

In the United Kingdom existing R&D support programmes acan offer support for R&D in services. Science and Inn

Framework (2004-2014) will be reviewed for possible change

of this project with Australia and it launched four national res


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of this project with Australia, and it launched four national resthe umbrella of this 11country initiative. OECD KISA project

ground for the national activities targeting R&D and inn

Current projects offer funding for research institutes and busin programmes run for several years and target R&D in servi

areas: business to business services, health care, tourism an

added mobile services. New EU state aid framework will be

for the possible that it could bring into R&D supports.

Germanys on going service R&D programmes will be comnew calls that are planned to be in the areas of: services and d

productivity of services and work in the service sector. The aiimprove the national capabilities to cope with the changing

knowledge on services productivity and to address the est

industry. R&D in Services is also addressed as one field of in

High-Tech Strategy for Germany. This is the first nationa

coordinated innovation policy developed jointly by all federa

to create a climate that helps to translate research results into

and services more rapidly The midterm target is to inte

technological fields with R&D in services in order to tap the sectors.

In Greece the new programme period 2007-2013, is likely R&D in services. It is clearly identified within the program

Strategic Reference Framework (NSFR), as well as in the s

development of RTD and Innovation activities. Also other

support service sector are underway. These will indirectly

services. The new community rules for R&D are more coR&D. The Greek investment law provides a lot of investm

knowledge intensive services.

In Sweden VINNOVA is currently developing a new service It will have stronger focus on services than the earlier pro

resources are allocated to the programme. The approach is

the Serve programme run by Tekes. In addition, a new

Excellence on public transport services has been establishedtest-beds in different locations in Sweden have been establish

VINNOVA. These basically are technology platforms that haand will now expand to services development and testing.

Th f t i th t th d t b ht i


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7 Case studies on R&D in service enterprises

This chapter synthesizes the key results from the case studies th

part of the project. These case studies are highlighting the real li

related to R&D in services in a range of different types of ser

these case studies are presented in a separate document. In add

nature of services related R&D attention will be given to developanalysed businesses have identified.

Illustrative case studies serve an important purpose as theyliterature-based concepts presented in the earlier chapters. Whil

valuable complementary material for the report they will also of

to communicate the key features of R&D in services to a wide

they will also demonstrate the heterogeneous nature of services an

instance, in relation to sectors, size of the business and dr

innovation in services. Each case study will provide an analy

service related R&D in examined case business.

Exhibit 10 The details of the case studies on R&D in servic

COUNTRY Name Industry(ies)BELGIUM VADIS Consulting

Creax Patent research, idea geninnovation studies, methodtraining, new technical ma

studies, and innovation soQuality Assistance Contract ResearchDefimedia e-business, e-marketing, e

consultancyTelemis Software program for med

management, and maintensupport

DENMARK BDO ScanRevision Accountancy and consultiFINLAND YIT Group Building systems, construc

services for industry, netwGERMANY Claas Agricultural engines andDeutsche Industrie Wartung Industrial maintenance anDrees & Sommer Project management and

consultingGREECE Singular Logic Software and related serv

7.1 Synthesis of case study findings and R&D in services


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7.1 Synthesis of case study findings and R&D in services

Public funding and R&D in services. In the examined servic

support for R&D tended to be concentrated towards the businesseout technology related projects such as software develop

development in connection with manufactured products. At th

supports for traditional services was limited among the case b

legacy of technology policy is recognisable, and also service butilise public R&D funding seems to be somewhat limited.

R&D staff in analysed service businesses.The number and statu

staff was also clearly related to the type of services that case firmthe technology related service businesses the number of full-ti

clearly higher than in service firms in general. Typical service f

numbers of full-time R&D staff, and much of the work was carr

basis in connection with customer projects.

R&D resources and their use. The allocation and use of R&D

wide variety of different practices. Organisational and personnelto play a strong role as an R&D activity. In several cases, R

related to new skills and competences development within the b

new service products development. Again, technology related a

seemed to have most formalised type of R&D processes, with bu

staff in place. Traditional and knowledge based services only

budget, or an R&D department. Instead, internal development

form of R&D and these are not typically recorded as R&D

interviewees, up to now there has not been internal, nor extkeeping such records. Case businesses illustrated a wide variety oin terms how they used the external R&D resources. While some

education businesses were extensively using external R&D s

businesses relied solely on their own resources, e.g., those b

offering security services.

R&D process and organisation. Typically R&D in services projects that had budgets and objectives. So there were allocated

in services, even if the R&D budged as such did not exist. H

budgets could be significant ranging from few thousands to seve

was mainly in manufacturing and software businesses whe

act as a catalyst of change transforming the entire organisation. W


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y g g gtechnologies play a key role as enablers of new services, availabi

equally important for new services development.

Some R&D bottle-neckswere identified. Cyclical nature of the bskilled personnel were brought up as issues that can have a nega

R&D in services. In addition, inefficient markets can create a ba

of new ideas. For instance, service markets are often fragmented

may have limited capability for new services development. Instmay focus on price competition that leaves little, if any room for

development. Also customers may be keen to go for lowesimproved services. Internal organisation R&D in services can als

for new services development. It was indicated that too

organisation of R&D activities does not create a fertile g

development. In many industries life-cycle effectiveness is seen a

services development, and this approach requires a more horiz

organisation. Service culture, or rather lack of it, was also brough

can influence R&D in services. Highly developed service c

beneficial for the service suppliers as it tends to facilitate the functioning markets. Advanced service culture that emphasizes q

customer needs can also speed up time to market cycle in the ser

In many services businesses R&D staff is working on part-time b

have both positive and negative influences. Especially in the SM

off in doing R&D and earning money by providing existing se

time, part-time R&D staff is often working closely with customer

understanding of the market needs. Finally, sudden changes in

problems in obtaining R&D grants, changes in standards and legi

up as situations that can cause bottlenecks for the R&D in service

Intellectual property management and protection was an are

related and software services were somewhat different from muc

of services. They used patenting, standardisation, software lice

methods. In other types of services IP protection was often les

and competitors were typically able to copy the service outcmonths. Such copying was hard to prevent, but in many instanc

only copy some aspects of the new service, not the entire proc

advantage and time-to-markets were seen as an essential element

and management.

theoretical frameworks that the business can utilise in i


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development.

As the R&D project is closer to everyday business, co-opera

academics were seen as more appropriate way to link wisystem. To facilitate this, there could be more incent

researchers to co-operate with businesses.

Typically planning horizon in public research is mucdevelopment cycle in the businesses. For businesses it is di

one research topic for many years, as the public R&D often do

Too strict fixing of research questions was also as seen as

since in businesses the research problems often evolve durialso totally new problems may arise during the progress of the

In addition to direct support for business R&D, public sector sho

creating an eco-system and markets where services markets thrive

observatories, aggregators, policy makers, and commerce laws

important elements of such eco-system. Also tax incentives were

to develop favourable environment for R&D in services. Fsuggested that tax incentives could be targeted to businesses th

parks and carry out R&D projects. Legislation could also be use

demand digital services, like for instance, the use of a digital

procurement legislation was seen as a potential problem as it

much the lowest bidder, rather than innovative solutions. In the ca

for business R&D the following points were brought up.

Public funding could benefit R&D in services better, if it coused for employee training.

Several businesses indicated have had limited resourcesadministrative procedures of public funding. Administrativ

research processes may also overstrain the capacities of smal

limited competence in applying public supports.

Future issues influencing R&D in services. Some of the emincluded service related standards, evaluation methods and the n

market research. It was indicated that there is a need for nation

level standards that are likely to develop for services such as he

service and maintenance services. Such standards can advan


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8 Promoting R&D in services some key policy

Policy makers have increasingly recognised the socio-econo

services. As a result, there is a growing interest to develop m

services within the EU but also in most other developed countri

Japan, and Taiwan. A number of major EU level initiatives

launched in this area. These include such topics as innovationmarkets, and the support for service business development.

Member State level there are several programmes aimed in the ab

the renewal of public sector services.

So far, there are only few policy measures specifically targetin

Still, it is clear that this policy domain has wide spread needs for

development. These needs range from basic research to design

policy. Policy development in the area of R&D in services is still

of the development and there are many deve

promoting the role of r&d in services

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