Innovation in dynamic service industries by John R. Baldwin, Guy Gellatly, Joanne Johnson, Valerie

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By John R. Baldwin, Guy Gellatly, Joanne Johnson, Valerie Peters

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In the financial sector, innovators look to their competitors for ideas. In the communications group, where changing technology poses a serious threat to firms, linkages with suppliers are crucial. The nature of the service provided by technical business service innovators results in an emphasis on working closely with customers as well as having highly developed research capabilities. Innovation is a complex process. An investigation of the sources of innovation reveals whether firms rely just on research and development, or whether they value this source at all, whether networking with other firms in the vertical customer/supplier chain or with competitors is important, and finally how important computer-based technologies have been.

In any case, the percentage of innovators indicating their innovations were world-firsts was less than 10% for communications and financial services but around 17% for technical business services. Generally, communications firms were ten times more likely to report local-market innovations than they were world-firsts. What were the examples that were given of the types of innovations? In technical business services, new products that were outlined included highly specialized software, task-oriented computer products, data management tools, and internet-based services.

2). This also accords with findings from the manufacturing sector (Baldwin and Da Pont, 1996). In general, in-house R&D is only perceived to be very important in technical business service firms. Conversely, other sources internal to the firm, such as management and marketing, are judged to be very important in each of the three industries. 3). This finding is further supported by a survey in the UK, which found that while firms generally collaborate to expand or deepen their expertise, seek out new markets and maintain position in existing markets, they typically place less importance on sharing research and development (Kitson and Mitchie, 1998).

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