Innovation and the Internationalization of Firms in the Service Industries: Empirical Evidence from a New Survey

Abstract

There is a growing interest in the service sector in industrialized countries due to its increasing employment share, contribution to economic growth and internationalization patterns. While the service innovation literature has extensively investigated the relevance of innovation for explaining the growth of the service industries (Miles 2005), little is known about the patterns of internationalization in this branch of the economy, the strategies adopted by service firms and the set of possible explanatory factors.

In order to shed new light on these issues, data on Norwegian service firms were collected through a web-based survey. The survey contained 25 questions on firms’ innovation and international activities in the period 2004-2006, and eventually collected a total of 814 completed surveys in a large number of service sectors (with an average response rate of 19%). The survey focused on three internationalization channels: international sales (e.g. export and foreign direct investment), international cooperation and R&D outsourcing, each corresponding to the three types of the well-known “globalization of technology” taxonomy (Archibugi and Michie 1995). In addition, data on different barriers to internationalization and innovation strategies were collected. The service industries were divided into four categories, based on the sectoral taxonomy developed by Miozzo and Soete (2001) and later refined by Castellacci (2008).

The empirical analysis of the newly collected survey data is carried out in three subsequent steps. First, it presents descriptive statistics of the main patterns. Secondly, it presents the results of an analysis of variance (ANOVA) in order to point out different innovation and internationalization patterns among the four sectoral groups. Thirdly, it presents the results of a regression analysis (logit model), in which the dependent variables are the various internationalization channels adopted by the firms, whereas the set of explanatory factors include their innovation activities, barriers to internationalization and a set of other firm-specific control variables. The results of the analysis highlight the importance of innovative activities, barriers to internationalization, and firm-level characteristics, and also point out that some of these factors differ substantially across the service sectors.