Productivity Growth in the Global Economy: Innovation in the Service Sector and the Role of Intangible Assets

The panel discussion featured a number of reports addressing the issues outlined below. The reports were followed by discussions on how productivity can be improved, with particular reference to the service sector.

• What are some policy issues in promoting productivity growth in service industries?
• What management strategies can be implemented in achieving productivity growth?
• What policies should be implemented to promote productivity growth?
• Given the inadequate level of statistics and research in the area of productivity, what are some future research topics?

There is much international interest in how R&D and intangible assets should be reflected in statistical data.

When compiling statistical data on productivity, at what level and for what purpose should the data be compiled? These are questions that are currently being debated.

Between 1995 and 2000, productivity growth in computers contributed to productivity growth in other industries. However, productivity in service industries remains low.

Service industries provide inputs to other industries. Therefore, productivity growth in service industries will have a major impact on productivity in other industries. Therefore, productivity growth in service industries is extremely important.

Intangible assets are not fully accounted for in Japan's System of National Accounts (SNA), and improvement must be made in this area.

The intangible assets accumulated by service industries are small and lack originality. What is needed is improved competitiveness that will generate value through global activities.

To improve productivity in service industries, we need to look at the whole picture including suppliers and logistics.

To improve productivity in service industries, corporate managers will have to take a serious look at "corporate value."

The government's service sector should be reformed to serve as a model for private service industries.

How can productivity be improved while maintaining customer satisfaction?

What is the importance of employee education?

Deregulation may result in productivity growth.

A report was given on the subject of "Economic Growth Initiative."

Policy issues pertaining to tangible assets have been resolved to a considerable extent by the revisions made in the depreciation system for tangible assets.

However, many policy issues remain to be addressed concerning intangible assets. In the future, priority should be given to resolving these issues.

Industry-academia-government collaboration is necessary for promoting the accumulation of intangible assets in service industries.

Delays in reforming and developing systems and standards may be obstructing innovation.

How should R&D expenditures be included in the SNA? What are the recent developments on this matter?

Japan does not have official statistics on labor productivity and total factor productivity. Are there any plans to compile these statistics in the future?

R&D expenditures will probably be included in the SNA. However, Japan will not be able to act immediately for the following reason. R&D expenditures are currently recorded as intermediate inputs. To record R&D as capital goods or investment, it will be necessary to determine how to treat the uncertainty that exists in R&D expenditures.

The international trend is to record all R&D investments, including failed R&D, in the statistical data. The thinking is that failed R&D activities also contribute to the accumulation of know-how.

To compile official statistics on productivity, it will first be necessary to compile statistics on capital stock as an indicator of productive capacity. For this purpose, investigations have recently been launched on depreciation rates and other matters. It will be possible to release official statistics on productivity when this is completed.

What are the policy implications of capitalizing R&D expenditures?

It is necessary to carefully consider what should be capitalized in the SNA.

Some important factors may not be included in the current statistical data.

The government and academia must cooperate in order to develop accurate statistics.

It is necessary to consider the link between corporate accounting and government statistics.

The structure of the Japanese retail sector is inefficient compared to the U.S. and EU.

Efficient stock markets support the entry of high-productivity firms and promote a country's productivity growth.

How reliable are international comparisons of productivity of commerce?

International comparisons are important. But analysis that takes domestic competitive processes into account is also required.

International comparisons of productivity must be undertaken with caution.

The relationship between deregulation and productivity is not clear.

It is important to consider how policy measures can be used to back up markets so that they can respond to the needs of many consumers.

In the SNA and Japanese statistics, productivity of wholesale and retail industries is measured by trade margin. The problem is how to assess them qualitatively.

The following questions were received from the floor.

Q: It is necessary to classify service industries in greater detail. Who is going to do this?

Q: Currently, service innovations have not been systematized. How should cross-industry and intra-industry systemization be undertaken?

The following responses were given to the above questions.

A: Universities and companies must cooperate in developing processes for research, education and transmission of information on service industries.

A: When considering service innovations, it is necessary to take into account the goals and objectives that individual companies in service industries are pursuing in their activities.

A: Service innovations should probably be analyzed from a more micro perspective.

Service industries have a very major impact on other industries. It is necessary to conduct a comprehensive analysis while taking into account the entire service sector and linkages with manufacturing industries.

The benefits of product differentiation differ between service and manufacturing industries. More research is needed in this area.

It is necessary to develop statistics pertaining to productivity and to conduct further research in this area.