Lasting change for the EU service sector
The EU-funded project 'The impact of service sector innovation and internationalisation on growth and productivity' (SERVICEGAP) investigated the role of services in various aspects of economic performance in EU countries. The four general areas were: the financial crisis, productivity growth, firm strategies in a knowledge-based economy and offering services in more than one EU country. SERVICEGAP produced analytical research papers containing original research, synthesis papers and policy briefs. Research on linkages between services and manufacturing revealed that the services sector output and productivity were less affected by the financial crisis than production sectors. This was due mainly to lower exposure to international markets. A study of the financial sector on regulation and economics performance highlighted the important role of banks in facilitating growth. Also, underlined in the review papers and presented at the project meetings was the risk of moving to smaller and less globalised banks, especially for smaller countries. Research on drivers of productivity covered intangible investment, linkages between manufacturing and services, and impact of the regulatory environment. Other important findings included the valuable workforce training linked with information technology and intangible assets in service sectors. The SERVICEGAP team also identified poor training offered to older persons, and the impact of trust and fear on productivity. The distinction between manufacturing and services has become blurred with many firms increasingly involved in both, raising shares of services occupations in the manufacturing workforce. Investing in product marketing, distribution and transport systems, for example, has a positive impact on export market shares of manufacturing firms. Innovation in service enterprises is related to higher productivity with the link being strongest for marketing innovations. According to project research, product innovation appears to generate employment growth in services. A study on the internationalisation of services covered three areas: trade, investment and outsourcing. Trade in services is substantial and growing, although smaller than for goods. Multinational and larger firms are more likely to trade, and one-way traders (export or import) are more prevalent in services than in manufacturing. International investment through mergers and acquisitions leads to growth in services and tends to have stronger effects on the performance of firms in services than in manufacturing. Enterprises experiencing positive productivity growth after foreign acquisition are more likely to be located in high-tech sectors and in larger, less open economies. The research results support further energy and effort to be expended in strengthening the services sector between EU member countries and deepening economic relations with the rest of the world. On the website there are three sections of over 45 discussion papers as excellent resources for further review. There are downloadable review papers, discussion papers and policy briefs. The policy briefs are useful summaries for policy decision-makers.
Keywords
Business services, economic growth, international trade, investment, service sector, productivity, economic performance, manufacturing, regulatory environment, product innovation