Innovation and employment in services: results from the Italian innovation survey

In this chapter the heterogeneous nature of innovative activities in the service sector and their impact on employment are investigated, using new empirical evidence gathered through the 1993-95 innovation survey carried out in Italy by the Italian National Statistical Office (ISTAT). Technological change does play a role in services: around one third of service firms have introduced a technological innovation in the period 1993-95. Innovation expenditures per employee in services are however much lower than in the manufacturing industry. Process innovation and investment represent the most important channels through which service firms innovate. The acquisition and internal development of software also represents an important source of innovation, absorbing 14% of total innovation expenditure. R&D activities represent a key innovation source for a small number of science and technology-based service industries. Taking the service sector as a whole, innovation activities have had a positive impact on total employment in the period 1993-95. The impact of innovation on employment however varies greatly according to the level of qualification of the labour force: innovation activities tend to substitute low skilled jobs with jobs with a higher level of qualification. Among small firms and in most service industries the net effect is positive, particularly in industries which have a scientific and technological base. A negative impact of innovation on employment is on the contrary found among large firms and in all financial-related sectors (Banking, Insurance and Other financial services). In these industries the labour-saving effect of innovation is linked to the introduction of IT and in particular software.