Knowledge and Innovation in the New Service Economy

Citation

Alon, I. (2002), "Knowledge and Innovation in the New Service Economy", International Journal of Service Industry Management, Vol. 13 No. 5, pp. 512-514. https://doi.org/10.1108/ijsim.2002.13.5.512.1

Knowledge and Innovation in the New Service Economy is a collection of essays from Manchester’s two leading social science research institutes – Policy Research in Engineering, Scence and Technology (PREST) and the ESRC Centre for Research on Innovation and Competition (CRIC) – and provides a multidisciplinary overview of the relationship between knowledge and innovation and specific elements of the economy, society and management.

The book has an eclectic selection of conceptual, empirical and descriptive papers covering multiple industries, data analysis, and discussions on the role of knowledge in the national and international context, accounting for 16 chapters and 270 pages. The book is a welcomed addition to the growing body of knowledge on the role of knowledge and innovation in the new service economy. This book will appeal to students, policymakers, economists, and business scholars interested in knowledge and service research.

Knowledge and innovation are key factors contributing to growth and prosperity in the new service economy. This book is unique in its content and includes:

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  macro statistics to highlight the contribution of services to economic activity;

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  firm level survey data to identify and consider client relations; and

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  case studies of four innovation‐oriented business services.

The service sector accounts for the majority of value added to employment and output in most industrial countries (about 73 percent of employment and GDP in the USA and about 68 percent in the EU).

Although service industries have been traditionally regarded as following their manufacturing clients, technologically backward, and labor intensive, the recent rise in knowledge‐intensive industries has led to a recognition of the importance of innovation and technology in the service sector and the global economy.

Firms have externalized and outsourced many of the services outside their core competencies to reduce their strategic risks. The growth of consultancy, financial, legal and insurance services is the outcome of some of this outsourcing. These types of services help users “negotiate complex social, physical, psychological and biological systems” (p. 12).

Knowledge‐intensive business services (KIBS), such as professional services and technology‐based services add value to the economy and its exportation capabilities. About one‐third of all the service exports of UK, France and the USA are KIBS related.

Using input‐output tables, Tomlinson examined the contribution of selected services on output in the manufacturing sector. He asserted that services should be seen not as subordinate to manufacturing, but rather drivers of the manufacturing economy through the transfer of specialized knowledge.

Tether and Hipp wrote about the competition in the knowledge‐intensive service firms and provided data from Germany to make their points. Claiming that service firms are diverse, the authors divide firms into technical and non‐technical and knowledge‐intensive and other service. High knowledge‐intense‐technical‐service firms have a lower level of standardization, higher level of information and communication technologies as a proportion of total investment in employees, more concern for quality and service innovation, and more likelihood to enter into an alliance with other organizations.

Flanagan, Miles and Windrum introduce the impact of knowledge on Web services. The number of Web sites with distinctive host name increased from 130 in 1993 to 650,000 by the beginning of 1997. The authors present three case studies concerning Web‐related services.

Miles, Bolisani and Boden focused their discussions on e‐commerce, linking its growth to the diffusion of PC in the 1990s. Electronic data interchange services, including ones relating to the telecommunication, software, and consulting services, have led to today’s e‐commerce environment.

Ian Miles wrote about sustaining knowledge in environmental services. The growth of this service is related to increased regulation.

Joanne Roberts claims that KIBS play a critical role in the development of a knowledge economy by examining the advertising, accountancy, computer services and management consultancy services. These industries originally internationalized to follow their clients and achieve economies of scale and scope by serving larger markets. The globalization of these industries expanded the flow of factors, labor, capital, and technology transfers between the host and home markets. Personnel traveling can be considered a form of people‐mediated exports (think of the consultancy business).

Jeremy Howells explores the impact of technology outsourcing and services and systems of innovation. He acknowledges that services are becoming more research and technologically innovative, highly specialized, and key industries to economic development and modernization.

Howells and Roberts present a useful table “Knowledge systems: institutional structure” (Chapter 15), which compares both the national and international environmental pressures that impact knowledge diffusion in the service economy.

Howells concludes the book by emphasizing the impact of services on infrastructure development, innovation, and knowledge transfer.

Service researchers would agree: services should no longer be viewed as tertiary in nature, but rather as drivers of economic efficiency and growth, which should be targeted by policymakers and economic developers. This book should be read by all who are interested in the impact of knowledge and innovation on the global service economy.