Public funding for product, process and organisational innovation in service industries

Abstract

Innovation is important for the competitive advantage of firms, especially for service firms. We argue that public funding, such as that from national and international agencies, is likely to have a positive influence on firms' innovations by complementing private funding, such as that from foreign and/or domestic firms and organisations. Unlike manufacturing firms, service firms tend to lack complementary resources for innovation; therefore, the additional funding from public sources enables them to acquire the necessary resources for innovation. Empirical results support our arguments.