Invisible innovation and hidden performance in services: a challenge for public policy

Although contemporary economies are undeniably service economies, since services are now our main source of wealth and jobs, the relationship between services, on the one hand, and innovation and performance, on the other, continues to be a matter of considerable debate. Thus in the still dominant industrialist or technologist approach to this relationship, innovation efforts and performance levels in services are underestimated. It is this approach that is responsible for the existence of two gaps: an innovation gap and a performance gap. The innovation gap indicates that our economies contain invisible or hidden innovations that are not captured by the traditional indicators of innovation, while the performance gap is reflected in an underestimation of the efforts directed towards improving performance in those economies. These gaps have their origin in certain more or less ancient myths about the fundamental nature of services and the errors of measurement associated with them. They may have harmful consequences for the validity of the public policies implemented at national or European level. Since they are based on imperfect or even erroneous forecasts, these policies may also prove to be inappropriate.