||The Philippine Development Plan 2011 to 2016 aims to create globally competitive services. This vision is echoed in the Comprehensive National Industrial Strategy. With the goal of joining the top 25 services exporters in the world by 2030 in line with the national vision, service industries must continually introduce new and better products to the market. Innovation will not only have own-sector impacts and be a source of competitive advantage for firms involved. Since services are used as intermediate inputs in the goods sectors, innovation in services which lead to quality improvements and efficiency will have positive economy-wide spillover effects that could be significant.
Innovation in services is a relatively new area of research and empirical work is scant particularly in the context of developing economies. It is important to build our knowledge base on the issue as services innovation is necessary for increasing productivity and achieving higher growth. A review of the literature will first be conducted. This will cover basic concepts and definitions, measurement issues, types of innovation in services and how this may be different from manufacturing firms. Conceptual and empirical work will be surveyed covering the experience in other countries. The next step is to find evidence of innovation in the Philippine setting. The starting point would be the 2009 Pilot Survey on Innovation conducted under a DOST-IDRC project. Other data sources, including survey of firms, will be explored and interviews and possibly case studies will be conducted to better understand innovation behavior in Philippine services. Based on the analysis of the evidence, implications for policy and regulation will be discussed. Future areas for research will also be recommended.