Panel Estimation of Export Activities in the Service Sector

While the service sector has gained attention in the empirical innovation research it is still neglected in the empirical research on export activities. This is partly due to the fact that services have been long regarded as non-tradable goods. However, about 20% of all German service firms report export activities. Furthermore, although more than 60% of all employees liable to social security are working in service sector firms, official data on German service sector firms is still scarcely available. Factors explaining export behaviour in the service sector are still unknown. We analyse the export activities of service sector firms using the Mannheim Innovation Panel-Services (MIP-S). Results of a Random Effects Panel Tobit give clear evidence that innovation activities and human capital are the main driving forces for success on foreign markets. However, it is not formal education that is essential for export performance. This raises the question whether the present university education is still adequate to prepare employees for the requirements of service sector firms. As is shown in the paper, the crucial importance of innovation activities for the competitiveness of service sector firms once more points out the need to adjust instruments of government policy. Political measures designated to improve the innovativeness of firms have to take into account the special characteristics of the service sector in order to avoid that only firms in manufacturing benefit from this support. Improving structural conditions for innovation activities of service sector firms, too, will not only lead to growth on the home market but also strengthen the competitiveness of firms on foreign markets.

(2002), Panel Estimation of Export Activities in the Service Sector, in: EU Kommission, DG Enterprise (Eds.), Innovation Papers, Vol. 18, Office for Official Publications of the European Commission, Luxembourg, 88-94