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Services are becoming dominant activities in the world, and service innovation is a way to increase growth and welfare. Service-innovation policies are justified by a wide range of reasons, including the existence of market and systemic failures. In developing economies, these failures are often more serious than in developed economies. Innovation in services presents specific characteristics that are different from innovation in goods. A policy framework and a policy menu with different options are proposed. They include horizontal and vertical policies, as well as a systemic approach in which services can constitute a key component of any innovation policy
