Book excerpt: Empirical and theoretical evidence on the German service sector is inversely related to its growing overall importance for the entire economy. This monograph offers a comprehensive theory-based econometric treatment of three important and severely understudied issues related to services: innovative activity, the effects of innovation on the demand for labour, and the performance of newly founded firms. In addition, the book contains detailed descriptive statistics on innovative activity, skill mix as well as on growth and current economic importance. It offers researchers, policy makers, and practitioners a unique opportunity to gain knowledge on the new German service economy.