Study examines measurement of service sector R&D

The services sector in the United States–which includes everything from restaurants to telecommunications to banking–is a major driving force of the economy, generating about 80 percent of the U.S. gross domestic product. As a result, tracking innovation in the services sector is an important indicator of future economic health.

But a new joint research project of the National Institute of Standards and Technology (NIST) and the National Science Foundation (NSF) found that it has become progressively more difficult to classify the research and development (R&D) that fuels innovation in the services sector. “The distinction between the manufacturing and service sectors is becoming increasingly blurred,” producing important impacts on the reporting of R&D activities, write Michael Gallaher and co-authors from RTI International of Research Triangle Park, N.C.
In some cases, data collected for NSF’s annual Survey of Industry Research and Development are classified as services R&D because the parent company is part of the service economy, yet the R&D described is directed at new manufactured products. In other cases, manufacturing companies are increasingly providing services and conducting service-related R&D that ends up being classified as manufacturing R&D. To improve the accuracy of the survey, the study makes a number of recommendations for improved definitions and revised wording of questions.

The study included detailed case studies from telecommunications, financial, system integration, and research, development and testing services. R&D in telecommunications, for example, might include the work required to deliver videos and other multimedia to wireless phones. In emerging areas such as biotechnology, small firms increasingly use contract research organizations (CROs) to provide complementary research services.

NIST plans to use the study results for strategic planning to identify infrastructure improvements that will help foster innovation in the technology services sector.