Firms in the services sector that utilize research and development (R&D) activities –whether outsourced or in-house– and avail of financing are more likely to be innovation-active, according to a survey examined by the Philippine Institute for Development Studies (PIDS) discussion paper.
The paper, authored by PIDS senior research fellow Ramonette Serafica and research specialist Queen Cel Oren, studies the evidence on innovation in service industries using the 2021 Survey of Innovation Activities of Establishments, which provided broader sector coverage.
The survey was conducted during the pandemic when firms had to pivot to new modes of service delivery to survive. It gives a more nuanced profile and innovation behaviors of services firms and seeks to identify the effects and determinants of innovation across the services subsectors.
It also indicates that firms employing at least one Fourth Industrial Revolution (FIRe) technology and using platforms are more likely to be innovation-active and produce at least one type of innovation.
The Internet of Things (IoT) is the most utilized FIRe technology, followed by 5G networks in most of the services subsectors, except for the Accommodation and food service activities and Professional, scientific, and technical services which use 5G technology more than other FIRe technologies.
Aside from utilizing IoT and 5G networks, Accommodation and food service activities; Financial and insurance activities; Education; and Arts, entertainment and recreation also use artificial intelligence and machine learning.
The survey also reveals greater reliance on internal and market sources of information while the utilization of institutional and other sources of information, such as incubators, scientific journals or technical publications, and regulatory bodies was low for most subsectors.
“Universities or other higher education institutions were also not popular cooperation partners. In terms of knowledge management, a policy to bring in external experts from universities, research institutes, or other establishments to participate in projects teams was also the least common practice across the subsectors,” it said.
Among the four types of innovation, organizational innovation was the most common type of innovation introduced in most service sectors, followed by marketing, process, and product innovation.
“For most of the services subsectors, the most common innovation activity of the establishments was “Training for innovative activities”. Across all services subsectors, cost factors are identified as the most common barrier considered of high significance,” it added.
