A Different Path to Growth? Service Innovation and Performance amongst Uk Manufacturers

Introducing and innovating services is advocated as a means by which manufacturing firms in advanced economies can retain or enhance their competitiveness. But little is known about how manufacturers innovate services, nor about the impact of service innovation on manufacturers’ performance. Using two consecutive waves of the UK Innovation Survey, this paper first examines how manufacturers innovate services, comparing this with how they innovate goods (i.e., material products) and production processes. We find that manufacturers tend to innovate services differently: R&D is found to be unimportant, whilst investments in marketing and training are found to be related to service innovation. The paper then examines the impact of service innovation on performance, in terms of innovative sales per employee and total sales per employee. We find that service innovation does not increase innovative sales but is associated with higher total sales per employee.