Absorptive Capacity and Innovation in the Knowledge Intensive Business Service Sector

Abstract

Innovative activity is performed to a considerable extent in the service sector, namely within the so-called knowledge intensive business services (KIBS). Particularly emphasizing the role of absorptive capacity, we analyze possible determinants of incremental and radical firm innovation using firm micro data from the KIBS Foundation Survey. The results show that access to knowledge through networking and cooperation is of utmost importance for innovative activity in the KIBS sector. Access to knowledge from universities and research institutions is particularly important for radical innovation, notwithstanding the degree of formality of cooperation. In contrast, access to knowledge from clients or suppliers only has a significant impact on the probability to innovate if the cooperation with these partners is based on formal cooperation via joint projects or formal cooperation contracts. Furthermore, we find empirical evidence for a positive correlation between KIBS firms and clients from the manufacturing sector: these stimulate in particular incremental, but also radical innovation.Innovation, Absorptive capacity, Knowledge intensive business services, Networking Technological opportunities, Germany,

Knowledge-Intensive Business Services as Credence Goods - A Demand-Side Approach

“…By transmitting codified and tacit knowledge to their clients, KIBS influence the innovation process by producing, transferring and recombining innovations in cooperation with their client firms (den Hertog, 2000). Therefore, KIBS drive knowledge-changing processes and offer produced knowledge (Strambach, 2008), which is positively affected by customers with a high degree of formalized knowledge in the respective field (Koch and Strotmann, 2008). In comparison to the manufacturing sector, KIBS require networks to disseminate innovation due to the highly immaterial nature of KIBS and the requirement of human-intensive interactions (Koch and Strotmann, 2008;Koschatzky, 1999, p. 752).…”

“…Therefore, KIBS drive knowledge-changing processes and offer produced knowledge (Strambach, 2008), which is positively affected by customers with a high degree of formalized knowledge in the respective field (Koch and Strotmann, 2008). In comparison to the manufacturing sector, KIBS require networks to disseminate innovation due to the highly immaterial nature of KIBS and the requirement of human-intensive interactions (Koch and Strotmann, 2008;Koschatzky, 1999, p. 752). Potential difficulties in using KIBS involve the complexity of cooperation, caused by the high degree of human interaction and learning process required (Martínez-Argüelles and Rubiera-Morollón, 2006;Wood, 2002).…”

The Differential Relationship between Absorptive Capacity and Product Innovativeness: A Theoretically Derived Framework

“…For instance, it is important for firms to build a network of collaborative connections with external actors, such as customers, suppliers, dealers, and even competitors, which allow firms to gain control in the search and selective permeability of knowledge into organizational boundaries (Chen et al, 2009). The recognition and absorption of new and related external knowledge, generates motivations which lead organizations to set continuous relationships with their external network partners, and establish technological cooperation agreements (Koch & Strotmann, 2008;Murovec & Prodan, 2009). Here, reliable, fast and qualified knowledge sharing among the relationship network allows firms to effectively organize and alleviate resources that are targeted to specific customer needs and wants, stimulating product innovation process (Chen et al, 2009).…”

What determines the innovation capability of firm founders?

“…In a second study, Koch and Strotmann (2008) analyze the impact of founder characteristics on the innovation performance of German start-ups in the knowledge-intensive business sector. They distinguish two categories of innovation performance, incremental innovation, and radical innovation.…”

“…at the earliest in 1989. In a second study, Koch and Strotmann (2008) analyze the impact of founder characteristics on the innovation performance of German start-ups in the knowledge-intensive business sector. In both studies, managerial characteristics and founder characteristics, respectively, showed rather low explanatory power.…”