Measuring Service-Sector Research and Development
The U.S. service sector is the largest sector in the economy and accounts for an increasingly significant share of gross domestic product (GDP). If we define the service sector as the nonmanufacturing, nonagricultural, nonmining, and nonconstruction sectors, it accounted for 78.9 percent of GDP in 2002 (Council of Economic Advisors, 2004) and for 83 percent of nonagricultural employees (Council of Economic Advisors, 2004). In addition to being a driving domestic economic force, service-sector revenues in the United States account for about one-third of service-sector revenues worldwide. Service-sector industries are characterized by a close interaction between production and consumption, high information content, the intangible nature of their output, and a heavy emphasis on labor capital in the delivery of their output (Sirilli and Evangelista, 1998). Historically, the service sector was viewed as having little or no productivity growth and an inability to innovate. It was also characterized by low-paying jobs, low levels of technological dependence, and a relatively undeveloped level of institutional organization (see Table 1-1). In contrast, the manufacturing sector, producing tangible outputs, was seen as the source of most innovation.