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Enterprise and Industry Directorate-General. European Commission. RESER Conference 14th September 2007 Services in the context of EU policy for Enterprise and Industry Ronald Mackay DG Enterprise and Industry. Topics of presentation. Main themes Challenges to industry

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Enterprise and industry directorate general

Enterprise and Industry Directorate-General

European Commission

RESER Conference

14th September 2007

Services in the context of

EU policy for Enterprise and Industry

Ronald Mackay

DG Enterprise and Industry


Topics of presentation

Topics of presentation

Main themes

  • Challenges to industry

  • Communication on industrial policy 2007

  • Innovation in services

  • Interlinkage industry and services

    • Services as inputs to industry

    • Industry as service provider

  • Productivity and competitiveness

  • Policy sreeening in service sectors

  • Key messages


Challenges to industry

Challenges to industry

Mid-term review of industrial policy

COM(2007)374

  • Stocktaking, launch of new initiatives

  • Programme of work to 2009

    Challenges to industry

    • Globalisation

    • Rate of technological advances

    • Energy and climate change

      Implications for the service sector

      Communication on industrial policy (2005)

  • Integrated approach (Horizontal and sectoral initiatives)

  • Concrete programme of work


Programme 2007 2009

Programme 2007 - 2009

Industrial Policy Initiatives

Horizontal (e.g.)

  • Sustainable industrial policy

  • Intellectual property

  • Structural change (anticipation)

  • Industry and services (policy screening)

    Sectoral (e.g.)

  • European food industry

  • Electrical engineering

  • Space; defence and security

  • Pharmaceuticals


Innovation in services 1

Innovation in services (1)

Expert Group Findings

Commission paper SEC(2007)1059

  • Services companies, generally, do not innovate less than manufacturing companies but great differences exist between knowledge intensive and other services.

  • Lower percentage of all service sector firms (34.0%) as opposed to manufacturing firms (39.3%) are technical innovators.

  • Theexception are KIBS firms, which are more likely than manufacturing firms to introduce either a product or process innovation (51.5 %)

  • Fazit: Service firms do innovate, but in a different way.


  • Innovation in services 2

    Innovation in services (2)

    Implications

    • Policy instruments need to recognise the specificity of innovative companies in services

    • The strong heterogeneity within services sectors has implications for policy

    • A distinction based on R&D intensity may be more adequate than services/manufacturing ?

    • Innovation support schemes need to focus on fast growing companies (not only in the service sectors)


    Innovation in services 3

    Innovation in services (3)

    European Innovation Platform for Knowledge Intensive Services

    • pilot action that will test new forms of integrated support mechanisms for knowledge intensive services with high growth

    • operational learning platform where such new policy approaches in support of innovation in services can be tested

      Aims

    • to foster technological as well as non-technological innovation (organisational innovation) in services

    • to practically implement such good practice examples and to further develop them in support of knowledge intense services


    Structural change 1

    Structural change (1)

    Structure of industry in Europe

    • Rate of change: too slow or too fast?

    • EU manufacturing remains specialized in medium-tech sectors and has not taken advantage of the fast growth of certain high tech sectors.

    • European businesses have not fully exploited either the opportunities offered by ICT technologies.

    • Also, within sectors, the EU is comparatively bad at reallocating resources to the most productive companies

    • Anticipation (getting ready, not forecasting) and development of capacity to change

    • Adjustment costs and the European Globalisation Adjustment Fund


    Structural change 2

    Structural change (2)

    Interlinkage industry and services

    • Service provision is mainly local. Industrial restructuring has an impact on the location, or relocation, of employment in the service sector. Will industry continue to procure essential business services close to where it is located?

    • Does the service sector have the capacity to create alternative employment in areas affected by industrial restructuring?

    • Impact of outsourcing/offshoring: Many services which were previously considered non-tradable are being increasingly codified, standardised, and suitable for delivery at a distance. (Digital Delivery)

    • What framework conditions have a positive, and which have a negative impact on company strategy?


    Industry and services 1

    Industry and services (1)

    Importance of services as inputs

    Reliance of industry on wide range of service inputs

    But

    • Relative absence of quality standards

    • Lack of market transparency

    • High transaction costs

    • Risk of dissatisfaction with service delivered

    • Need for procurement of business related services based on based on more objective criteria and best value for money


    Services as intermediate inputs to industry

    Services as intermediate inputs to industry


    Industry and services 2

    Industry and services (2)

    Manufacturers are also service providers

    • Manufacturers build “products” but their clients want “solutions”

    • Manufacturing companies increasingly provide services in conjunction with their product.

    • Increased demand for complex systems (e.g. satellite system, mobile phone base station, transportation systems…)

    • Business models (e.g. Public Private Partnerships, Build-Operate-Transfer)

    • They are confronted with the same administrative and regulatory obstacles to trade as service firms, both within the EU and internationally.


    Servo industrial sector austria

    Erweitertes Konzept der Industrie

    & Produktionsorientierte Dienstleistungen

    Erweitertes Konzept

    der Industrie

    +

    Produzierender Bereich

    industrieorientierte

    Teile des

    Dienstleistungssektors

    & Industrienahe Dienstleistungen

    Produzierender

    Bereich

    Produzierender Bereich

    Produzierender Bereich

    Bergbau u. Gewinnung v. Steinen u. Erden

    Bergbau und Gewinnung von Steinen und

    Erden

    Sachgütererzeugung

    Sachgütererzeugung

    Energie- u. Wasserversorgung

    Energie

    -

    und Wasserversorgung

    Bauwesen

    Sachgüter-

    erzeugung

    Bauwesen

    Sachgütererzeugung

    Fachverbände der

    Kernkonzept

    Kernkonzept

    Servo-industrial sector (Austria)

    Servoindustrieller

    Sektor

    Anm.: Die Industrienahen Dienstleistungen beinhalten die Vermietung beweglicher Sachen ohne Bedienungspersonal (NACE 71), die Datenverarbeitung u. Datenbanken (NACE 72) sowie die Erbringung v. unternehmensbezogenen Dienstleistungen (NACE 74). Die Produktionsorientierten Dienstleistungen umfassen: 1/3 Handel, Reparatur v. Kfz u. Gebrauchsgütern; 1/3 Beherbergungs- u. Gaststättenwesen; 1/3 Verkehr u. Nachrichtenübermittlung; 1/2 Kredit- u. Versicherungswesen; 1/2 Industrienahe Dienstleistungen erweitert (Realitätenwesen [NACE 70], Forschung u. Entwicklung [NACE 73]).

    Quelle: IWI (2007)


    Servo industrial complex

    Servo-industrial complex


    Services in the economy

    Services in the economy

    DG ECFIN study 2007

    Sources:

    • EUKLEMS

    • COMTRADE

      Industry classification:

    • NACE @ 2 or 3 digits

      Usual caveats about methodology: how reliable are the figures?


    Manufacturing and tradeable services

    Manufacturing and tradeable services


    Labour productivity performance

    Labour productivity performance


    The eu productivity problem

    The EU productivity problem

    EU market services have contributed relatively little to growth

    (Sectoral contribution to business sector productivity growth)

    (Source OECD, Scarpetta, 2007)


    Services productivity

    Services productivity

    A shared problem

    • Productivity growth in services lags behind that of manufacturing, but the service sector is already large, and still growing.

    • Productivity increases in industrial sectors may have a ceiling, which is determined by the relatively low productivity of service inputs

    • Industrial companies employ increasing numbers of people in internal service functions. Their overall productivity growth will reach a limit if they do not tackle the issue of services productivity.

    • Services productivity is too important to leave it entirely in the hands of the service providers.


    Initiative on industry services 1

    Initiative on Industry/Services (1)

    Rationale

    • The cost, quality and productivity of certain service sectors, have an impact on the competitiveness of industry.

    • Regulations which affect the performance of professional and other business services, financial services or the retail and distribution sector also have an impact on industry.

    • In addition, competitive network industries enhance the competitiveness of industry as a whole.

    • Industry is both a user and provider of a growing range of services related to innovative technologies and products.


    Industry related services

    Industry related services

    Service sectors with close linkage to industrial sectors

    Quality, price and competitiveness of the service sector has impact on competitiveness of many industrial sectors

    Examples:

    • Engineering services

    • Creative industries (Design, Architecture, Advertising)

    • Other Business Services

    • Network services (Distribution, Communications)

    • Facility Management

    • Recycling, Waste disposal

      Methodology:Same form of competitiveness analysis as applied to the industrial sectors could be applied to these (or other) service sectors


    Initiative on industry services 2

    Initiative on Industry/Services (2)

    Methodolgy

    • Identification of key areas of interdependency

    • Policy screening of relevant service sectors

    • Identification of obstacles to increased competitiveness and market failures

    • Assessment of impact on industry

    • Assessment of need for intervention


    Initiative on industry services vice 3

    Initiative on Industry/Servicesvice (3)


    Challenges for the service sector

    Challenges for the service sector

    • Provide more inputs to policy development

      • Industry, innovation, SME, Research

      • Internal Market, Public procurement, Intellectual property

      • Trade, Competition

    • Emphasise contribution to economic growth and job creation

      • Lisbon strategy, National reform programmes, Community Lisbon Programme

    • Invest in more R&D

    • Invest in more innovation

    • Increase productivity

    • Increase use of standards


    References and links

    References and links

    References and links

    • Mid-Term Review of Industrial Policy COM(2007)374

      http://ec.europa.eu/enterprise/enterprise_policy/industry/index_en.htm

    • Innovation in Services SEC(2007)1059

      http://www.proinno-europe.eu/index.cfm?fuseaction=nwev.NewsReader&news=1918&lang=EN&topicID=90&parentID=0

    • EU Industrial Structure 2007

      http://ec.europa.eu/enterprise/enterprise_policy/competitiveness/2_indics/indics_compet.htm

    • Industriebuch 2007

      Industriewissenschafliches Institut (IWI) Vienna


    The end

    The End

    Thank you for your attention


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