Centre
for Research on Innovation and CompetitionCentre
for Research on Innovation and CompetitionArchive
The study of Knowledge-Intensive Business Services (KIBS) has taken off in the last few years, in part triggered by a 1994 study led by a CRIC director (Miles et al, 1994). No less than three European conferences in the first half of 2000 addressed the topic, and it will feature heavily in the European Competitiveness 2000 report.
KIBS, are services that rely heavily upon professional knowledge. Thus the employment structures of firms in these sectors are heavily weighted towards scientists, engineers, and experts of all types. Some are heavily technology-oriented; others are much more concerned with knowledge of administrative, regulatory or social affairs. They also tend to be leading users of IT to support their activities. They typically have as their main clients other businesses (including public services and the self-employed).
Some KIBS firms supply products, which are themselves primarily information and knowledge resources for their users (e.g. measurements, reports, training, and consultancy). They may generate original knowledge, or fuse, "package" or translate knowledge resources from other sources. Some KIBS firms use their knowledge to produce services which are intermediate inputs to their clients' own knowledge generating and information processing activities (e.g. communication and computer services). These client activities may be for internal use or supplied to yet other users in turn. Finally, some KIBS firms apply their knowledge to carry out functions for the client, which are externalised for commercial, juridical or other reasons. Facilities management and disposal of toxic waste are cases in point.
Thus the KIBS sector includes large parts of the following service branches: Marketing/advertising: Computer networks/telematics (e.g. VANs, on-line databases); some Telecommunications (especially new business services); Software; Other Computer-related services; Training; Design; some Financial services (e.g. securities and stock-market-related activities); Office services; Building services (e.g. architecture; surveying; construction engineering); Management Consultancy; Accounting and bookkeeping; Legal services; Technical engineering; Environmental services (e.g. remediation; monitoring); Scientific/laboratory; R&D Consultancy and "high-tech boutiques".
Depending upon the type of service supplied to clients, some KIBS are more likely to facilitate innovation in the clients themselves than do others. Those services that deal most directly with the client's co-ordination activities or production process, or with the nature of the product itself are most likely to facilitate innovation. There is considerable work to be done exploring the roles of KIBS in the knowledge economy. What sorts of knowledge and knowledge resource are they producing, packaging, delivering? How does their contribution influence the development and retention of technological and organisational capabilities among their clients? What sorts of role are being played in the distinctive distributed innovation systems of different "sectors" and countries by various classes of KIBS?
CRIC is at the leading edge of developments here, and KIBS feature in various lines of enquiry - for instance, the study of contract R&D services focuses on one, particularly interesting, branch of the sector (see Outsourcing of R&D). Likewise, CRIC research on IPR and services has looked at IPR issues in KIBS. Finally, KIBS are frequently critical agents in distributed innovation processes, and pose problems for the measurement of innovative activities and outputs, so analysis of them has contributed to, and will continue to feed into, these lines of work.
We report some highlights of a broad body of CRIC work under three themes:
Theme 1. Employment and KIBS
KIBS have been a major sector of employment growth in recent decades, with some technology-related KIBS (tKIBS) being particularly good performers. But what sorts of jobs are created, and how do they contribute to the "knowledge economy"? As well as producing overviews of the sector, we have undertaken studies based on workforce surveys, which have suggested that KIBS represent important vectors for the flow of knowledge resources across firms and sectors. Indeed, in one UK data set, the evidence suggests that these are particularly highly skilled workers, embarked upon some form of "lifelong learning" - while the more conventional recommendation that higher labour mobility will promote such learning and facilitate dynamic use and development of knowledge has little support. The results may reflect a particular time and place, and we hope to extend the study to encompass other contexts in current work.
Tomlinson has been exploring data that tell us more about the processes of learning and skilling involved in KIBS. Using UK data on individual careers, he has studied the accumulation of human resources through on-the-job training, technology use, and lifelong learning. He finds that "knowledge workers" and staff in KIBS are particularly prone to report having learned new things, received training, worked with computers, moved between different types of work, and so on. Rather provocatively, given the general policy emphasis on promoting labour mobility, he finds that (for the UK data) the workers who enjoy more internal job mobility appear to have significantly greater access to training, are increasingly flexible and use technology (computers) more often than workers who have external mobility (i.e. across firms).
Tomlinson's analysis shows flows of professionally skilled staff out of manufacturing into KIBS, and a particularly strong concentration of learning in these sectors. Many knowledge workers in UK manufacturing shifted into services during the 1980s. However, knowledge workers in services themselves were highly stable with regard to occupation and sectoral position throughout this period. Thus, the embodied knowledge generated within the service sector has tended to remain within it. (Though KIBS do contribute their knowledge to their clients.) People in skilled manual and lesser-skilled non-technical occupations had very little opportunity to move into the more dynamic KIBS sectors during the restructuring of the 1980s.
Thus, it looks as if the growth of the knowledge economy does involve an increase in requirements for higher skills, but workers with skills which are no longer required find it very difficult to acquire new skills, at least in the UK. KIBS sectors in particular have been very difficult to break into for many workers, especially non-professionals from manufacturing.
Direct social relationships with staff, partners, suppliers and clients are very important in protecting knowledge in KIBS, not least because the sorts of knowledge with which they deal are hard to protect through IPR arrangements like copyright. The sorts of control attempted may involve informal relationships, or be formally governed by employee law, or by contractual arrangements between collaborating or trading firms.
Some data on this is provided by an exploratory survey in the UK, which contrasted a case of tKIBS (environmental engineers) with professional KIBS (accountants); architects formed a third and intermediate case. Internal working practices are very widely cited as important means of protection, especially by larger firms. The threat of losing knowledge embodied in key members of staff becomes increasingly important, and increasingly the focus of management effort, in larger bodies - and it is among the most common methods used by smaller environmental engineering firms too.
For firms in all KIBS, staff recruitment was one of the main means of acquiring external knowledge, but the emphasis varied: for accountants this was used to acquire routine knowledge, for the environmental engineers specific knowledge. Departure of personnel was thought to be a major source of threat of losing competitive knowledge for the latter group, and least so for the architects: apparently the S&T workforce's knowledge is particularly valuable. Statistical analysis does not find significant relationships between emphasis on S&T knowledge and on internal working practices, at the firm level; but it does reveal strong relations between the latter and knowledge of policies and regulations, and knowledge of markets and after-sales support systems. Though the results may reflect the specific choice of sectors studied here, there is an interesting implication. This is that what is valued in employees is not just their generic technical knowledge (which presumably can be obtained as "paper qualifications") but their having been ability to contextualise this in the world of problems which clients confront.
Theme 2. KIBS as Intangible Investments - and Investors
The "discovery" that increasing shares of investment, and increasing emphasis in competitive strategy, involves so-called intangible assets has produced a welcome emphasis on human resources and intellectual capital -as well as a good deal of muddled thinking. KIBS are relevant to the problem both as heavy consumers of and investors in a range of intangible assets - workforce skills, intellectual property, software and information systems - and also as themselves constituting intangible assets for their clients.
A CRIC visitor (Michael Peneder from WIFO in Vienna) has undertaken a study which classified manufacturing sectors according to their investment in various types of tangible and intangible asset, and in one study CRIC researchers found that this classification works far less well for service sectors. There are however some signs that services may be grouped in terms of employment structures in a manner with analogies to those Peneder reports for manufacturing. KIBS appear as very similar to high-tech manufacturing in such an approach. CRIC has undertaken other work examining the nature of intangible assets, and Ian Miles is currently on the scientific committee for the new European Competitiveness Report which examines the utilisation of KIBS in some detail (as well as tackling other services issues, such as trade in service products).
Theme 3. Services Innovation
The role of KIBS in innovation in services has been a subject of continuing interest. One conclusion of our work is that this study has highlighted a number of features of innovation processes that are not confined to service firms and industries, but that are prominent in them, and that are also found elsewhere in the economy - but have generally been neglected . We have contributed to academic debates on the topic (see the December 2000 issue of the International Journal of Innovation Management, edited by Miles, for instance) , and to discussions at the OECD and elsewhere about improving innovation survey methods so as to better capture the aspects of innovation (e.g. presentations by Tomlinson to the OECD, and a study by Tether and Miles for the EC on Community Innovation Survey methods). Detailed work has been undertaken with a special survey of services innovation in the German economy, and with Community Innovation Survey data for the UK and other countries (both described elsewhere in Analysis of Innovation Survey Data). KIBS firms emerge as strong innovators in their own right, and though the data cannot tell us much about the co-production of innovation with clients, the German data do suggest that many KIBS conform to the pattern of services as producing products in close interaction with clients (while several other services produce largely standardised products). As for the role of services in innovation systems, we have undertaken studies using various forms of data (in addition to the input-output) analyses) to address this. The conclusion is that many services still remain poorly linked into innovation systems. However, tKIBS are often an exception, and some large service firms act as orchestrators of supply chains.
Significance of Results and Outcomes
KIBS are central players in distributed innovation processes. They are often sources of innovation (e.g. R&D and design services), agents of transfer of knowledge for innovators (consultancies, training, etc), and coordinators and integrators of different types of expertise (engineering services). The study of such KIBS contributes to our general interest in these themes.
As business services, many KIBS have little to do with final Consumption, though the processes of consumption by corporate users are extremely interesting, and our attention is increasingly turning to the way in which KIBS are used. Some KIBS play an important role in aligning design, production and consumption, however: marketing, market research and market forecasting; trends analysis: advertising and public relations, etc. More recently, e-commerce services (in which we have a particular interest) have emerged as new transactional intermediaries, and infomediaries between suppliers (of various types) and consumers. Our interest in these services also has a considerable bearing on the themes of market structures and Competition, because we see here new market "playing fields" being created - which are rather less level ones that the "pure market" images conjured up by some e-commerce proponents.
B., Andersen, J., Howells, R., Hull, I., Miles, and J., Roberts (eds) (2000), Knowledge and Innovation in the New Service Economy, Aldershot, Edward Elgar.
S Metcalfe and I Miles (eds) 2000, Innovation Systems in the Service Economy, Dordrecht: Kluwer
I., Miles and M., Boden (eds), (2000), Services, Innovation and the Knowledge Economy, London, Continuum
I., Miles & M., Tomlinson, 2000, 'Intangible Assets and Service Sectors: The Challenges of Service Industries', in P., Buigues, A., Jacquemin & J-F., Marchipont (eds) Competitiveness And The Value of Intangible Assets, Aldershot, Edward Elgar
M., Peneder, I., Miles, and M., Tomlinson, 1999, Intangible Investments, Industrial Sectors, and Competitiveness: International Comparison, Report to DG III/A5, WIFO, Vienna, 1999/120/A/599B 76pp
J., Butler, H., Cameron, and I., Miles, 2000, Grasping the Nettle: draft final report of a Feasibility Study concerning a Programme for research into the measurement and valuation of intangible assets, Report prepared for DTI, CRIC & PREST, University of Manchester, March 2000 49pp
B., Tether, C., Hipp and I., Miles, 1999, Standardisation and Specialisation In Services: Evidence From Germany, CRIC, University of Manchester, Discussion Paper No 30 October 1999 journal articles forthcoming in Research Policy, and International Journal of Innovation Management
I., Miles 1999, "Services in National Innovation Systems: from Traditional Services to Knowledge Intensive Business Services" pp 57-98 In G., Schienstock & O., Kuusi (eds.) Transformation towards a Learning Economy: the Challenge to the Finnish Innovation System, Helsinki, Sitra (Finnish National Fund for R&D), ISBN 951 563 358 3 ISSN 0785 8388 SITRA 213
I., Miles, 1999, 'Services and Foresight', Service Industries Journal, Vol., 19 no 2 pp 1-27 April 1999
CRIC/IDSE/ISE, 1999 (CRIC authors: I Miles, A Roy, B Tether, G Tampubolon), "Intra-industry Variation in Service Sector Innovation: Evidence from the UK, Germany, & Italy", Analysis Of CIS Data On Innovation In The Service Sector: Interim Report no.2 September 1999 report to European Commission DG12, CRIC, University of Manchester 49pp
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