Knowledge-intensive Services and International Competitiveness: A Four Country Comparison

Abstract

The nature and consequences of services innovation remains a woefully underresearched topic. The paper calls into question two statements that are frequently repeated in the political-economic discourse on services. The first concerns the suggestion that Germany is a 'services laggard' that needs to restructure its domestic economy if it is to remain internationally competitive. By contrast, the UK is frequently held up as an example of a successfully restructured 'services economy'. The paper draws an important distinction between the quantity of services in a domestic economy and the degree of connectivity between services and other economic activities. The latter, it is argued, is far more important in determining the size of spillovers from services innovation enjoyed within a domestic economy and, hence, to international competitiveness. Particular attention is paid to the role and impact of knowledgeintensive service sectors in this regard. In addition to the UK and Germany, data is drawn from the Netherlands and Japan. Using these four comparative cases we explore the distinction between a high representation of services in the domestic economy, and the innovation spillovers facilitated by a high degree of connectivity between services and other economic sectors within a domestic economy.