«Promoting Innovation in the Services Sector: Towards Productivity and Competitiveness»

The performance and productivity levels of the service sector is becoming increasingly decisive for promoting growth and equality in both developed economies and, particularly, in developing ones. While the importance of the service sector has been increasing in Latin America and the Caribbean (LAC), its rate of productivity growth is relatively low, particularly among small and medium enterprises (SMEs), when compared to domestic manufacturing, and has been identified as the sector pulling down aggregate productivity levels. Since the service sector has traditionally been seen as less innovative than manufacturing, national innovation policies have paid limited attention to firms in this sector. If policies of innovation are to be effective and productivity-enhancing, they need to reflect the ways in which innovation takes place inside the service sector firms.
Existing empirical evidence on innovation and productivity in the service sector is restricted to developed countries, not being available any systematic evidence for LAC countries. This project aims at filling this gap. The objective of the project is to generate a comparative analysis on the determinants of innovation in the service sector firms and on the impact of different kinds of private-public interventions in service innovation in LAC countries. It aims to design service sector-focused policies closing policy makers’ knowledge gaps with regards to whether and how to intervene in this sector, and correcting the bias against services in the current regional policy mix. For this purpose the project will analyze in depth SMEs case studies that document innovation in the service sector and will evaluate the impact of public-private interventions in LAC. This project is part of a coordinated research effort with the Inter-American Development Bank (IDB), institution that will run a parallel research project on the topic.