New EU members more innovative on services?

An EU-funded report hints that some new member states are outperforming the EU’s largest economies in the service sector. However, it could just be that new members are playing catch-up.

A report, funded by DG Enterprise and conducted by the United Nations University and Maastricht University joint research centre, reveals that Latvia and Romania are among the most innovative countries in the services sector, ahead of France, Germany and the UK. 

The report is intended to complement the annual European Innovation Scoreboard (EIS), due to be published in November 2006, which mainly bases its evaluation of countries’ performance on traditional indicators, such as number of patents, innovation and R&D expenditure and innovation sales shares. 

However, these indicators only assess technical innovation in the manufacturing sector, but, with services representing an increasingly large proportion of the EU economy, service-sector innovation will play a key role in driving economic growth. 

And this new report completely unbalances trends found in the 2005 EIS. Indeed, it shows traditionally good performers, such as Denmark and the Netherlands, to be well below average on the ‘Service Sector Innovation Index’ (SSII). 

Nevertheless, the report plays down these findings, saying that innovation in the services sector cannot really be compared across borders because good results can simply mean that lagging countries with poorly developed service sectors are catching up, whereas companies in countries with a highly developed services sector have much less room for innovation because they are already near the limit of best practice. 

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