Knowledge interaction with manufacturing clients and innovation of knowledge-intensive business services firms
Zi-Lin He
Department of Organization and Strategy, Tilburg University, The Netherlands
Poh-Kam Wong
NUS Business School, National University of Singapore, Singapore
PP: 264 - 278
Abstract
The existing literature on knowledge-intensive business services (KIBS) predominantly focuses on their role as innovation agents in innovation systems, with limited attention to innovation of KIBS firms in its own right. Using a sample of 181 KIBS firms in Singapore, this paper examines the key determinants of innovation behavior of KIBS firms.
We find that knowledge interaction with manufacturing clients is positively associated with KIBS firms' own innovation. We also find that export intensity, a strategic focus on marketing and communications, and human capital intensity are positively related to KIBS firms' own innovation.
Keywords
knowledge-intensive business services, knowledge interaction, R&D, innovation, human capital, Singapore
Article Text
More than four decades ago, Fuchs (1965) introduced the term 'service economy' to describe the dominance of services in the employment structure in the US. This has since become a worldwide trend. According to EUROSTAT (1999), in the European Union, services accounted for 50% of its GDP and 46% of its total employment in 1970, but 67% of its GDP and total employment in 1997; in the meantime, the share of manufacturing was decreasing. A recent OECD working paper (Wölfl 2005) shows that by 2002, services contributed about 70% of total value added and total employment in most OECD countries. A similar trend of increasing share of services can be found in many developing countries as well.
Service firms were traditionally seen as innovation laggards. When innovation did occur in services, they were usually not regarded as self-generated, but through diffusion and adoption of new technologies originating from manufacturing industries. In his classic taxonomy of sectoral technological trajectories, Pavitt (1984) regarded services indiscriminately as being 'supplier-dominated', putting them in the same grouping as other technology laggards in traditional manufacturing industries like textile, food, wood and paper products. Indeed, as observed by Drejer (2004: 551), 'decades after services outdistanced manufacturing from an employment perspective, manufacturing has continued to dominate innovation studies'.
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