Norwegian report 2002

Introduction
As sketched in earlier annual reports on research to the RESER research group, research on services in Norway has been rather limited compared to research on manufacturing and other industrial systems. Explicit emphasis on innovation and particularly innovation systems has followed the same pattern, being rather exceptional up to the 1990s. However, some changes have occurred during the 1990s, notably in the last part of the decade. This can be interpreted from several angles.
- The need for initiating growth in Norwegian industrial life beyond the petroleum sector, which dominated so strongly during the previous two decades.
- A European trend of stressing the service sector and innovation within it as crucial for understanding underlying factors in industrial growth and job creation. This was visualised among other places in the chapter on employment in the EU Amsterdam Treaty and subsequent follow-up Action Plans.
- A more updated direction in regional research where the need for learning and thereby regional innovation systems has been recognized as paramount.
- A renewed emphasis on global issues, among which recent purchases and takeovers of Norwegian industry by transnational corporations have caused a lot of concern.
Still, in spite of all these needs for clarifying trends and structural changes, research on innovation linked to services is very much in an infant stage in the country. It is rather fragmentary, and as such, lacks coherence. The main positive exception is a rather new research group, STEP, founded in 1994 for studying technology, innovation and economic policy, from its inception somewhat loosely affiliated with the University of Oslo and still enjoying the cooperation with the research environment associated with the university. In addition to this, The Norwegian School of Management (BI) has done substantial research on entrepreneurial activity, some of it bordering on innovation and innovation systems. On this background much of the rather scarce research output in the field of innovation and services will be taken from the activity in these research institutions and their affiliates.

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Innovation processes in services
It may seem pretentious to talk about tradition in research which covers such a short time span. Yet, two traditions can be discerned in Norway in this field of services research. Research on entrepreneurship, mainly in small and medium-sized enterprises, has been on the agenda since the early 1980s, even including an edge systematisation of entrepreneurship and gender (Berg & Spilling (2000). A more recent approach is explicitly concerned with innovation, also by and large as performed by SMEs. The two lines have been separate, but efforts are now being made of merging the two research approaches. A book summing up this combination is under completion, Nyskapings-Norge ( Innovative Norway), BI, ( forthcoming).
The two main professional milieus mentioned in the introduction stand for the bulk of the research conducted on innovation in services. Under the heading “Innovation activities in SMEs”, Nås gives an overview of the activities in the last part of the 1990s in Norway. Understanding innovation as an interactive learning process, he finds more innovative enterprises in large as compared with small firms, but when the small ones are active, these are as much involved in innovation activities as their large counterparts in relative terms. When the part of innovation expenses incurred in the field of R&D is considered, this is highest in manufacturing. A third of the total was registered in services, however, about half of it in KIBS enterprises and half in the other service sectors. As far as service products are concerned, changes due to innovation are particularly evident in computer services, and a little less intense in other business services. It was found that in service innovation activities the role of external supply of R&D is somewhat exaggerated. Internal development in the enterprises, customers and suppliers are, in many respects, highly important sources of innovative information.
At BI Olav Spilling has been particularly active in research on entrepreneurship in SMEs and has, in that connection, also probed into the field of innovation. In his edited state-of-the-art work “SMB 2000” he finds, like Nås, a higher expenditure on innovation in manufacturing industry than in services, but the relative volume in the latter is higher, 3,6% of total costs as compared to 2,4%. And what is more, new and improved products stand for half the turnover in services, only 35% in industry. While 31% of the innovative enterprises in the secondary sector introduced products new on the market, 41% did so among the service providers.
The research at STEP has disclosed a widespread innovation activity in services. According to Hauknes, advanced producer services are particularly important in contributing to improving cost efficiency and quality of production and in developing new service concepts. “Soft” or non-technological innovation is prominent, although in the field of information technologies play an important part in shaping services. Organised strategic innovation is also increasing in importance. One spectacular innovation activity is the increased scope and integration of ICT technologies and infrastructure, which both give rise to new activities and raise complex needs of systemic interfacing. This innovation is particularly emphasized by Hauknes in the summing-up report “Services in innovation. Innovation in services” and is reiterated by Wiig Aslesen in a recent paper.
At BI Lande Nyborg and Gui Standal analysed four successful innovating service enterprises in different sub-sectors and found product and market development abilities, positioning in the market and a broad business environment particularly important for a good result in service innovation. That the leaders are open for advice and input from other actors and consciously and systematically seek for relevant knowledge, not always the most “advanced”, are also invaluable assets in the innovation process.

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The role of services in promoting innovation in other sectors
The term national and regional innovation systems have gained general acceptance during recent years, since it was introduced by Lundwall (1992). Central to this orientation is the realisation of interactive learning and learning processes as a foundation of innovation and progress in enterprises. Knowledge intensive services are found by STEP researchers to be building institutions in national innovation systems. They contribute to make firms in various sectors learning organisations and to organise production in a more efficient way and aid in both product and process innovation. Recent research in Norway has thrown light on the importance of external service as a “midwife” assistance to SMEs in periods of particular intense entrepreneurial activities. An interesting research contribution in this context is Bjarnar, Amdam and Gammelsæter (BI and Molde Regional College) on management qualification and dissemination of knowledge in regional innovative systems. With a long historical perspective they analyse and interpret the role of publicly organised consulting to SMEs from the inception of this service provision in the 1910s to the 1990s. They show the particular positive role of technical and economic consultancy in the classical entrepreneurial period in the 1930s and up to the1950s. This system was reorganised later, never regaining its vitality and broad application. The latter conclusion is also reiterated in STEP research, where it was found that service related systems in general now appear to be only weakly integrated into wider innovation systems. Particularly the links between several service sectors and public infrastructure organising national innovation systems are poorly developed.
The recent STEP contribution to innovation systems research includes many aspects related to the use of services for enhancing innovation capabilities in user sectors. Worth–while mentioning in this connection is the 2000-2001 study of innovation in Norwegian agrofood production and use of innovation services. It could be concluded that in the cases of intensive service application there were clear records of positive impacts both on production systems and further commercialisation.
Interesting contributions to the research on use of services as an innovative device in several industrial sectors are the publications by Jevnaker & Bruce and Jevnaker on design and innovation dynamics. This is an example of the importance of long-term relationships between clients and design experts, where the latter make up a creative asset, implying acknowledgement and learning and producing substantial competitive advantage. Studies in several selected industrial enterprises unanimously showed that designers as innovative collaborators working in close interaction with the leadership are resource persons and pay dividends. Use of designers is most profitable when extended from the backstage within the firm on to a front-stage – in the market, by making the customers part of the product innovation system.

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Services, innovation and space
The most explicit research report in mapping and analysing regional innovation is the STEP project “Regional Innovation Systems”, where 10 non-central industrial complexes have been scrutinized from the point of view of interactive learning. Although it was concluded that national rather than regional interaction is essential in many of the “industrial districts”, particularly as regards provision of services of high competence, regional resources are essential in promoting innovation and growth. Certainly, the role of services in the traditional narrow sense of the term may seem subordinate in this process, where a specialised labour market, a system of sub-deliverers, learning processes, a spirit of competition and the existence of demanding customers are shown to be the variables that make up the main success factors.
In “Growth enterprises in Norway” Spilling reflects on the critical mass of actors and industrial activity as a prerequisite for further growth. In some sectors, notably in fisheries and fish processing this may open up for regional innovation. In most sectors, however, it will mean continued centralisation, and in this concentration process services, particularly knowledge intensive business services, may be important driving forces. Isaksen in the paper “Cities and the new economy” comes to the conclusion that software producers and consultants in Norway, who today make up one of the largest service sub-sectors, far more than in large countries with a more differentiated urban system, will be subjected to forces making for strong concentration in the capital city area. Routine and mobile activities ( i.e.programming and support) may be decentralised away from large cities , whereas innovation and complex production activities of an intensive character remain. Wiig Aslesen finds the clustering of KIBS in the Oslo region best explained by the important client base in the area. In addition to this, the availability of a differentiated labour force making up for the excessive turnover is utterly crucial, whereas proximity to specialised knowledge infrastructure is of inferior importance.

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Research contributions on global issues
This is a field where the dearth of research is particularly evident in Norway, and where the existing research is more of a descriptive than analytical nature. Reported in earlier RESER surveys is the project launched in the mid1990s at STEP on “Services in European Innovation Systems”, mainly a review worked out in collaboration with Ian Miles. Among recent contributions at the same institution can be mentioned a project on instruments of innovation with emphasis on other countries, restricted to a general survey for the OECD area and a more minute description of measures in the Nordic countries and the Netherlands. The report distinguishes between general and specific measures and finds time ripe to consider these in concert. One important lesson to be drawn from the investigation is the fact that even countries in rather close proximity are different in industrial structure and operate with different knowledge systems and administration. This puts much restriction on the possibility of directly transferring innovation policies and instruments from one country to another.
With direct relevance to innovation in services in developing countries is a research project at SNF (The Foundation for Research on Economics and Business Administration) In the project “Trade in information services and economic development.” a two country model of trade in information services suggests that there are significant gains to be reaped from liberalisation of trade and investment in ICT services and that small, poor and labour intensive countries gain most. An exception is developing countries having consumers with low preference for information intensive goods. It is also shown that improvements in infrastructure and human capital may spill over from one country to another, in this case notably from rich to poorer countries.

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A short note on policies of innovation
As contended by way of introduction there was traditionally rather sporadic formulation and implementation of policies and measures for innovation in Norway, at least up to the mid1990s. Emphasis on growth enterprises and their requirements have been particularly weak. In recent years one of the public institutions for the promotion of industry, the SND ( The Norwegian Industrial and Regional Development Fund) has started systematically to record its engagement in innovative activities. Simultaneously, several official documents have been produced with the explicit purpose of proposing measures for encouraging innovation and combining entrepreneurship and innovative activities. Common to these is a perspective beyond investment in and understanding of R&D as a linear process. Instead innovation is viewed primarily as an interactive learning process, needing a broad set of input factors. In this context services are considered particularly crucial both in their own right and as support activities for other industrial sectors. Service functions are important loci of learning and organisational flexibility in enterprises, and as such to be explicitly addressed in a future oriented innovation policy.
This policy orientation is somewhat removed from a preoccupation with national industrial clusters, which has been in vogue in industrial policies also in Norway, towards a consideration of dynamic regional industrial environments. The latter has in recent years been promoted through the REGINN program, an experimental instrument in NFR (The Research Council of Norway) for building innovation into regional industrial systems. This program was evaluated as generally positive for stimulating regional innovation and was proposed to be prolonged in the above-mentioned STEP report from 1999, Regional Innovation Systems.
In support of an innovation policy is also the shift of political regime that occurred in the autumn of 2001. It has signified a marked turn from a social democratic distribution policy to neo liberal politics of innovation. In the white paper on regional policy, April 2002, “Growth in the whole country, “ more emphasis than before is put on “Knowledge parks and Incubators.” The role of the SND as an actor in the innovation process will thereby be strengthened, as will specifically SIVA (The State Industrial Estates) in its role as provider of infrastructure and responsibility of regional innovation systems.

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Conclusion
The short presentation of ongoing research and the attached bibliography show that only a limited range of issues have been addressed in Norway in recent years in the field of innovation and services. Most of the research has been concerned with innovations within the service sector itself, the bulk as descriptive overviews and state-of-the-art surveys. Increasingly, however, efforts have been made to illuminate the role of service application by other industrial sectors in order to build up interactive innovation systems. In this context some edge analyses have been produced on dynamic regional innovative environments. Most of these follow a traditional manufacturing industry approach. This should indicate a rich field of potential future research combining the role of producer services and the other sectors of the economy as drivers in innovative activities.