Metka Stare

Exploiting ICT potential in service firms in transition economies

Service industries are the most intensive users of information-communication technology (ICT) and some developed countries have already displayed noticeable productivity gains due to ICT use in services. The pattern of intensive use of ICT in services tends to be replicated in transition economies, however the evidence of ICT impacts on growth and productivity is lacking at the aggregate and industry level owing to deficient data and methodological problems. To overcome some of the problems in estimating the effects of ICT use we pursue firm-level analysis and apply production function approach to estimate the impact of ICT on the performance of service firms in Slovenia. The results suggest that service firms are more intensive ICT users than manufacturing firms and that ICT use significantly influences the productivity of service firms. The positive impact of ICT use on productivity applies to all service firms irrespective of their size. The links are stronger for service firms with above average ICT use. Due to the absence of data on complementary expenditures for training and organisational change related to ICT adoption the results might overemphasise the effects of ICT investment.

Public and private services transformation in the CEECs

In the period 1995–2005 the convergence of employment shares of the Central and East European Countries (CEECs) to the EU15 average was faster in private than in public services. This reflects the different starting positions of both groups of services and particularly the relative over-employment in public services in the CEECs at the outset of the reforms. Benchmarking the employment shares in CEECs against the average share of market economies at the similar income level shows that some CEECs maintain a disproportionately large share of employment in public services. The evaluation of the progress of the CEECs towards EU15 standards through the lens of the efficiency of private services and the performance of public services, indicates that the gap in private services is much larger. The challenge remains how to simultaneously boost employment and efficiency in private services, while curbing the employment in public services without jeopardising their performance. Exploiting the innovation potential in private and public services as well as the interfaces between the two may contribute to solving the problem.

Advancing the Development of Producer Services in Slovenia with Foreign Direct Investment

Producer services in Slovenia need to be upgraded to fully exploit their potential for increasing the efficiency of the economy, and for accomplishing market-oriented reforms. The lag in producer services development in Slovenia refers to insufficient development of specialised managerial, organisational and marketing know-how and skills and to poor competition. These features are common for all countries in transition. Foreign direct investment is suggested as a means to enhance producer services development. Empirical analysis supports the view that the largest benefits of foreign direct investment in business services could be expected from spillover effects to local economy, related to the transfer of knowledge and skills, to indirect productivity of business services and to the improvement of their quality and range.

Regional landscape of services in Central and Eastern European countries

Transition brought about deep structural changes to Central and Eastern European Countries (CEEC) and increased differences in regional development. The patterns of regional variation in services development in these countries are poorly explored. This article aims to narrow the gap in knowledge by relying on a modified economic base model and on convergence/divergence discourse. It is being argued that transition-related factors and structural characteristics explain different levels and trends in regional variation of services in individual CEEC. The lack of data hides divergent tendencies in the regional variation of individual services that need to be further addressed.

Service Development in Transition Economies: Achievements and Missing Links

Service activities are now acknowledged as key players in economic development, societal change and public policy worldwide. This exciting Handbook not only contributes to ongoing conceptual debates about the nature of service-led economies and societies; it also pushes back the frontiers of current critical thinking about the role of service activities in urban and regional development and the important research agendas that remain to be addressed.

Public services performance: an extended framework and empirical assessment across the enlarged EU

Performance of the public sector is at the core of long-term wealth creation and welfare improvement. Yet, its measurement remains inadequate and flawed with data deficiency. In this paper we propose an extended framework for the assessment of public services performance that accounts for long-term impacts on welfare and empirically evaluate it across twenty-five European countries on the basis of a wide set of proxy indicators. We relate the performance scores to input costs indices and propose a coherent typology of countries that corresponds to the patterns of economic effectiveness of public services. The empirical analysis reveals that, because of differences in input costs across the enlarged EU, the economic effectiveness of public services varies to a much larger extent than the performance, with some relatively large-sized governments (Sweden, Denmark, Austria) being the most effective ones.

Explanation for public and private service growth in the enlarged EU

This paper complements a large body of literature on structural change and underlying factors for the expansion of services. The main aim is to explore the determinants of the employment growth in the enlarged European Union from the perspective of various service groups, public, private and mixed services, and to identify which factors played the most significant role in the period 1995–2007. The roles played by standard determinants, the state, social and demographic changes, institutional framework of labour markets and membership to old EU15 considerably differ across service groups.

Transition, regulation and trade in services

Market-oriented reforms launched at the beginning of the 1990s have had a profound impact on the restructuring of the service sector in transition economies. Reforms have introduced complex regulatory changes that substantially diminished the barriers to competition in services, thereby improving the supply of services. The article explores the patterns and effects of regulatory changes in the Central and Eastern European Countries (CEECs) on services exports in the period 1993–2004. The econometric analysis finds a statistically significant impact of the regulatory reforms on service exports. The effects are more significant for the period 1999–2004 and seem to suggest that efficient implementation of reforms during the accession process had beneficial consequences also for service exports. However, there is enough room for the CEECs to dismantle further the obstacles to services provision and to improve the governance of the service markets within the internal market for services.

Research on Services: From Exploring the “Residual” to Services Science

Research on services has traveled a long way, starting from a category of non-productive spending introduced by A. Smith over the bumpy road of three centuries of economic thought1 toward new concepts such as services science. From being treated as a residual in national accounts, services became the dominant category in most economies. Important lessons have been learned in the evolutionary process of the research of services and some stereotypes about services have been dismantled, which improved the apprehension of services on a conceptual, methodological and analytical level. The sectoral approach toward explaining development has enabled services (tertiary sector) to be disentangled from industry (secondary sector) and agriculture (primary sector) and introduced some distinguishing features of services such as intangibility, non-storability, non-tradability and low productivity of services. Gradually, with more diversified study of services coupled with technological advancement, the heterogeneity of services was acknowledged, allowing some services to be treated as storable, tradable and not necessarily consumed simultaneously with production. Furthermore, the analyses pointed to increased linkage between services and other sectors, which broadened the understanding of services beyond sectoral boundaries and revealed the intermediary role of services and service functions in the economy, in companies or in public institutions. This is best manifested by the fact that some of the largest manufacturing companies have seen their businesses shift from products to services, the latter generating the bulk of their turnover.

Tapping the innovation potential of knowledge intensive services in emerging economies

The knowledge and awareness of the innovation potential of services in emerging economies is lagging behind even though services in most of these economies occupy the largest share of GDP and employment. Innovation policy is focused on technological innovation failing to enhance complementary organisational and marketing innovations that are particularly important for the service sector. The paper aims to identify the distinct features of innovation in knowledge intensive services (KIS) that could inform the shaping of innovation policy in emerging economies in order to better respond to the structural changes in those economies. The analysis draws from the insight of KIS companies’ case studies in Brazil and Slovenia to identify the types of innovations, the organisation of innovation activity and knowledge protection, the main drivers of innovation process and actors involved. The relevance of those elements is discussed from the perspective of designing public policy that could support the exploitation of service innovation potential in emerging economies in general.