The effect of service innovation on R&D activities and government support systems: the moderating role of government support systems in Korea

This study analyzes the effects of R&D activities and government support programs for the product innovation of service industry. With the advent of the knowledge based society, the technology innovation of the service industry has become an important source of national competitiveness. However, the studies on technology innovation have focused on manufacturing industry not the service industry. This study analyzes how differently R&D activities and the government support programs have influence on product innovation by the size of companies and how the government support programs have a moderate effect in the relationship between the R&D activities and the innovation. The results of the study are as follows; first, in case of large enterprises, both the internal and external R&D activities were proven to be the important elements for product innovation. In case of SMEs, it was analyzed that only the internal R&D activities are significant. In other words, it was found that internal R&D activities are the important factors of product innovation for both big companies and SMEs. Second, only the direct financial support for SMEs had a positive effect on product innovation. This can be understood as a result relative to the effectiveness and necessity of direct financial support to SMEs' product innovation. Third, in the case of the moderating effect of the government support programs, the programs that provide indirect opportunity for innovation had the positive moderating effects only for SMEs. In conclusion, internal R&D activities were proved to be an important factor of product innovation for both large enterprises and SMEs. And government support programs have had a significant effect only in the case of SMEs. To have an impact on the moderated effect of the government support programs for SMEs, the internal R&D activities were confirmed. This study supports the direction of establishing SMEs support policies in the prospect of service sector innovation.