A Snapshot of Innovation in the Philippine Services Sector: Findings from the 2021 Survey on Innovation Activities of Establishments

The PDP 2023–2028 recognizes innovation as a key driver of growth in the services sector, creating a strategic framework to reinvigorate the sector and strengthen creativity and innovation. To help formulate appropriate strategies and policies, this paper examines evidence on innovation in service industries using the 2021 Survey of Innovation Activities of Establishments, which provided broader sector coverage. The survey was conducted during the pandemic when establishments had to pivot to new modes of service delivery to survive. It offers a more nuanced profile of the demographics, innovation behaviors, and the determinants and effects of innovation across services subsectors. Among the four types of innovation, organizational innovation was the most common type introduced in most service sectors, followed by marketing, process, and product innovation. For the majority of the services subsectors, the most common innovation activity among establishments was “training for innovative activities”. Across all services subsectors, cost factors were identified as the most significant barrier. Organizations that employ at least one Fourth Industrial Revolution (FIRe) technology, obtain funding, use platforms, engage in research and development (R&D) activities (whether outsourced or in-house), or utilize knowledge management methods are more likely to be innovation-active and to produce at least one type of innovation. The survey also reveals greater reliance on internal and market sources of information, while the use of institutional and other sources, such as incubators, scientific journals or technical publications, and regulatory bodies, was low for most subsectors. Universities and other higher education institutions were also not popular cooperation partners. In terms of knowledge management, regularly updating internal databases or manuals was the most common practice, while a policy to bring in external experts from universities, research institutes, or other establishments to participate in project teams was the least common practice across the subsectors. The Philippine Innovation Act (RA 11293) provides various interventions to address impediments arising from cost, knowledge, market, and legal or regulatory factors (Albert et al. 2023). Given the diversity of services, a one-size-fits-all strategy will not be effective. While this study provides a snapshot of the innovation profiles across different subsectors, an in-depth analysis of the innovation ecosystem is required to develop industry-specific innovation roadmaps.