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Innovation in Low-Tech Firms and Industries

Innovation in Low-Tech Firms and Industries

Industrial Dynamics, Entrepreneurship and Innovation series

Edited by Hartmut Hirsch-Kreinsen and David Jacobson

It is a general understanding that the advanced economies are currently undergoing a fundamental transformation into knowledge-based societies. There is a firm belief that this is based on the development of high-tech industries. Correspondingly, in this scenario low-tech sectors appear to be less important. A critique of this widely held belief is the starting point of this book. It is often overlooked that many of the current innovation activities are linked to developments inside the realm of low-tech. Thus the general objective of the book is to contribute to a discussion concerning the relevance of low-tech industries for industrial innovativeness in the emerging knowledge economy.

Chapter 9: Industrial Innovations in Relation to Service Sectors

Marja Toivonen

Subjects: economics and finance, economics of innovation, innovation and technology, economics of innovation


Marja Toivonen INTRODUCTION Services play a dominant role in the present-day economic landscape. They are also pivotal sources of growth for production, and particularly for employment, within ‘post-industrial economies’. Besides the growth taking place in service sectors, services play a critical role in the advancing development of the manufacturing sector. The underlying reason is that the share of intangible assets – relationships, information and knowledge – as sources of value for firms is increasing in relation to tangible assets – physical materials and goods (Tomlinson, 1997; Hipp and Grupp, 2005; OECD, 2006). Linking services to manufacturing is not a new phenomenon if we mean services that support products and production. Many industrial firms have for decades produced or purchased marketing and sales services as well as services linked to research and development or human resources management (Martinelli, 1991; Mathieu, 2001a). What is new is the idea that services can be an important source of competitive advantage in manufacturing. Industrial firms are today increasingly adopting strategies in which services do not fulfil a supporting function but are seen as a key growth area for future businesses. Services are sold either separately or, more commonly today, combined with physical products into integrated solutions (Davies, 2003a; Howells, 2000). In addition to the increasing importance of intangible assets, manufacturers have several other reasons to favour service-oriented strategies. First, the markets for many manufactured products are maturing. Second, the production of services provides steadier revenue, as many service sectors are less sensitive to economic fluctuations than manufacturing,...

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