When we’re asked to think of innovative industries, most people conjure up high-tech sectors like information technology or biotech. But, innovation also occurs in more prosaic industries like construction or retail banking. A new study from Great Britain’s National Endowment for Science, Technology and the Arts (NESTA) examines the role of “hidden innovation” in six so-called “low innovation” industry sectors. The research makes a bold and important claim: “the innovation that matters most differs between sectors.” In other words, innovation in the legal services field looks a lot different from innovation in the oil production industry. Innovation in these services sectors depends very little on R&D spending. Instead, innovation is often more about absorbing ideas instead of creating new ones. The study also finds that service sector innovations are rarely affected by traditional tools of “innovation policy.” Framework conditions, such as tax policy or the local regulatory climate, are more important factors. Because each sector has unique approaches to innovation, the public sector will never be able to fine-tune innovation policies that can support all industries. Only Industry leadership can provide the type of specialized sectoral knowledge and skills that are required.

Access the June 2007 National Endowment for Science, Technology, and the Arts report, Hidden Innovation, by Michael Harris and Richard Halkett.