This policy briefing shows how innovation happens in services businesses and how policy can help overcome the barriers they face.

Key findings:

• Innovation in services varies widely between sectors. Some services sectors are highly innovative, but the picture overall is mixed.
• Traditional research and development spending is less important for services than having highly skilled workers, ICT and strong relationships with other businesses.
• Services firms’ barriers to innovation include a lack of expertise, resources and support.
• Government should invest in high-level skills and knowledge transfer beyond science and technology and develop a significant Innovation Advisory Service.
• Policy needs to be informed by indicators that capture the full extent of innovation in services.

Services are increasingly important to the UK economy, generating over 75 per cent of value-added. But until recently, our understanding of how they innovate has been poor and policy has neglected innovation in services.

This research sheds light on innovation in the services sectors and the specific barriers service firms face. It also outlines the ways in which Government should take services seriously when it comes to innovation. 

Author:
Nesta