One of the main objectives of the European Service Innovation Centre has been the development of a European Service Innovation Scoreboard that can measure the impact of service innovation. This involves the introduction of a data set of indicators that can reveal the real role of services at national and regional levels - a role or a contribution that had previously been hidden or, in essence, undetectable. In this interview with the ESIC Newsletter, Hugo Hollanders from the Maastricht Economic Research Institute on Innovation and Technology (MERIT) outlines the aim and the methodology behind this European Service Innovation Scoreboard (ESIS).
What is the rationale behind the European Service Innovation Scoreboard?
The aim of the European Service Innovation Scoreboard is to capture and demonstrate the impact of the transformative power of service innovation. This transformative power was a concept introduced by the Expert Panel on Service Innovation in the EU and the panel explained that service innovation has “the potential to profoundly change the innovative potential of other sectors and catalyse the drive towards economic growth”.
Thus, our ambitious task was to provide a stable and common set of useable and replicable indicators that was capable of identifying and benchmarking the transformative power of service innovation. Work on ESIS has included creating a methodological proposal including indicator systems, organising a validation workshop in Brussels and then adjusting the methodological framework in accordance with the recommendations of the workshop. These activities, conducted over the past year, have resulted in a pilot version of ESIS published in June 2014.
Were you able to demonstrate the impact of service innovation?
The question of service innovation and its impact is a complex issue, which is not easily detectible through significant correlations or similar procedures. There are several reasons for this. First of all, innovation as such, and service innovation in particular, cannot be measured with one-dimensional indicators. Secondly, service innovations are not necessarily ‘stand-alone results’ that are sold on the market, as they are often incorporated in further economic processes. Additionally, it is difficult to determine the exclusive effects of service innovation on economic development and structural change. We tried to consider these issues in our methodological framework and to differentiate between input, throughput, output and outcome.
This helps to clarify that service innovation should not be seen ‘in isolation’ but should rather be recognised as being strongly integrated into the economic structures and processes of countries and regions. Therefore, it seems logical that there are several development paths and that European nations and their regions should develop diverse models, depending on their structures and contexts. So some countries might focus more on service activities and service innovation, whilst others might have a wider focus on manufacturing and a third group might be very strong in both fields.
What are the main differences across the EU?
Our analyses enabled us to draw some general conclusions. For instance, indicators reveal that there is a variety of situations across Europe at Member States and regional levels, particularly with respect to innovation input, throughput and output. Comparing the ESIS findings with the results of the European Union Innovation Scoreboard underlines the fact that European innovation leaders rank highly on the ESIS input, throughput and output dimensions. However, we can also see that some other Member States rank highly on these dimensions. This might reflect the different development paths that have been mentioned before and additionally there is a certain time lag in measuring the results of service innovation.
Previous analyses have also shown that service sectors are of considerable importance to national economies in Europe, as their output is used by other economic actors. We were able to find positive associations between the input of selected service fields in other sectors and variables like the GDP per inhabitant or exports. An additional factor, which should not be neglected, is that firms in these sectors provide highly-skilled jobs and we also found indications of positive firm dynamics and high-growth firm shares over the past years.
How do the main differences correlate with ESIC’s work in the model demonstrator regions?
The ESIS indicators have underpinned evaluations of the regional performance and the potential of service innovation in each of the six model demonstrator regions. These evaluations analysed the current state of the framework conditions in which companies operate and the inputs into, and outputs from, service innovation. As the indicators provide an objective overview of the regional innovation systems, the results can be compared and also used to formulate future policies.
From our point of view, the main strength of the Scoreboard is to give regions and Member States a more detailed picture of what happens in their territories, at least of issues which are measurable through the available statistics. The comparison of this data with qualitative information can be considered as being a useful tool to monitor existing activities and policies and to define strategies and milestones for the future. In this respect, the comparison of quantitative and qualitative information gathered by ESIC, through the accompaniment of the six demonstrator regions and the visits to these regions, which included regular exchanges with their key actors, is a valuable input and a particularly solid base for innovation policies.
What are the main elements of ESIS and what kind of data is being provided?
ESIS contains a wide range of data which had not previously been collected on a systematic basis. In addition to the indicators that focus on the service sector and its innovative activities, ESIS also contains selected indicators that can assist in the analysis of structural change. These include, for instance, Gross Domestic Product (GDP), the percentage of the workforce that represents highly educated people and the share of Knowledge-Intensive Business Services (KIBS).
Official Eurostat data has been used for many indicators but collecting regional data on service innovation has been a major challenge. Firm level data on innovation activities is collected by the Community Innovation Survey (CIS) but for most countries CIS data is only made available at national level. For ESIS, we developed a methodology to estimate regional CIS data by combining national CIS data at the industry level and by assuming that innovation intensities at the national level also hold true for the regional level. This methodology was also validated by external experts during the workshop in Brussels that was mentioned above. The methodology of ESIS has been captured in a report, which lays out the framework for the measurement and analysis of service innovation, its transformative power and the resulting structural change.
ESIS presents a statistical profile of the model demonstrator regions, showing their performance in relation to each of the indicators and comparing it with overall EU performance. These profiles demonstrate the relative strengths and weaknesses of the regions and highlight potential areas for the formulation of new policies that aim to improve the impact of service innovation.
What are the similarities and differences between the European Service Innovation Scoreboard and the Innovation Union Scoreboard?
The EU’s main innovation benchmarking tool is the Innovation Union Scoreboard (IUS), which monitors the innovation performance of the EU Member States. The most recent IUS was published on 3 March 2014 . IUS focuses on the country level and measures innovation in its broadest sense – from manufacturing industries to services – and includes both technological and non-technological innovation.
The European Service Innovation Scoreboard (ESIS) contributes to the implementation of the Innovation Union and complements the Innovation Union Scoreboard by concentrating on service innovation at both the national and regional levels. The comparison provides a similar picture in terms of the framework conditions and inputs and throughputs of service innovation but offers a different picture for the outputs of service innovation and its outcomes. Most of the indicators used in both ESIS and IUS are 'stock indicators' and capture the most recent levels of inputs and throughputs of the innovation process. The fact that both show similar results confirms that service innovation accounts for a significant share of overall innovation performance, as measured in the IUS. However, outcomes in ESIS use 'flow indicators' which measure changes over time with the ‘less performing’ countries more likely to register faster change. The fact that neither the levels of service innovation nor of overall innovation are linked to outcomes can easily be explained, as high performing countries will show a below average change and low performing countries an above average change.
How does the Scoreboard help policy-makers to improve regional innovation systems and their related policies?
ESIS can help policy-makers by informing them about the strength of service innovation in their regions and, in particular, in the three service industries identified by the Expert Panel as having the transformative power to change other industries. These three service industries are:
ESIS includes several indicators to measure both the presence of these industries in a region and the intensity of innovation taking place in each of the industries. ESIS also provides statistical information on the framework conditions for innovation, in general, and service innovation, in particular,on the outcomes of service innovation. ESIS should ideally be combined with a qualitative appraisal of the strengths and weaknesses of a region as is being provided by the ESIC consortium in each of the six demonstrator regions. The ESIC Self-assessment tool (SAT) has also compared the regional policy-makers’ views of the policy mix with quantitative ESIS data. This helps to ensure that policies are developed to improve performance, especially in relation to those weaknesses which are assumed by policy-makers to limit the development of each of their regions. An update of ESIS, using more recent data and covering several non-EU regions and countries, has been scheduled for later this year.