Innovation in the Service Sector and Competitive Strength

Abstract

Apart from the incentive provided by scientific progress, the incentive for innovation essentially comes from customers and suppliers. In other words, incentive is mediated through markets, their momentum and their intermeshment — in short, through the economic structure. The greatest difference in the German system when compared to the USA and other highly developed countries such as Great Britain is to be found in the service sector which is considerably less developed in Germany (see Section 1.2.2). This also has considerable consequences for the development paths and types of specialization which German industry has chosen. The German service sector is catching up only gradually. In particular, specialized business services and activities related to the banking industry and insurance business have developed greater growth momentum — albeit along what would be considered a comparatively low baseline by international standards. However, growth has been modest even in these fields in recent years.²⁷