Measuring 'SERVERD': pie in the sky or substantive activity?

All industrialized and even industrializing economies now exhibit a dominance of services in the composition of their GDP. The services sectors are dynamic and innovative, and frequently show growth rates in excess of the manufacturing sector. Services include knowledge intensive service activities or KISA's. However KISAs, especially R&D present difficulties for accounting purposes, let alone the production of meaningful and reliable S&T indicators. This paper argues that the problem of measuring services expenditure on R&D (SERVERD) is perhaps overstated. Working from the Frascati definition of R&D, a set of company case studies is presented in order to tease out the various dimensions of SERVERD. Case studies include banking, insurance, clinical trials, retail and mineral extraction. It is argued that the solution to the problem of computing SERVERD lies both in the co-generation of a mutual understanding between measurer and respondent of what counts as SERVERD, and a clear understanding of the R&D value chain contributing to the project under scrutiny. I To this end a core set of questions that can form the basis of semi-structured interviews are identified. The implication of this approach is that conventional `knock and drop? survey technique is inadequate to the task of measuring SERVERD. It is further argued that South Africa's outlier behaviour in respect of R&D expenditure per researcher arises through the difficulty of quantifying these extended R&D value chains. An estimation method to deal with this is suggested. As an effective mechanism for compiling SERVERD it is suggested that survey agencies identify one or two exemplar firms per sub-sector; understand the firm(s); benchmark the scale of firm SERVERD in relation to company revenue (turnover, new premiums written, interest income) and use this ratio to impute comparable SERVERD for other similar firms. SERVERD is thus measurable directly or by careful imputation and estimation. We conclude with remarks on new indictors that emerging innovation pressure will demand of surveys.