Profitability determinants of Portuguese knowledge-intensive business services: empirical evidence using panel data models

Abstract

This article studies the profitability determinants of knowledge-intensive business services (KIBS). To do so, we consider a sample of 187 Portuguese KIBS for the period 2002 to 2009, using dynamic panel estimators as estimation method. The results indicate that size, age, liquidity, long-term debt and R&D expenditure are determinants stimulating the profitability of Portuguese KIBS, with risk being a restrictive determinant. In addition, profitability is found to be persistent over time. The empirical evidence lets us make important suggestions for political decision-makers and the owners/managers of Portuguese KIBS.

Keywords:

• firm objectives
• KIBS
• panel data
• profitability determinants

JEL Classification:

• D21
• G32
• L21

Notes

¹ According to various studies about firm profitability determinants (Adams and Buckle, 2003; Goddard et al., 2005; Gschwandtner, 2005; Galbreath and Galvin, 2008; Pouw and Kakes, 2013; Shehzad et al., 2013; Gambacorta et al., 2014; Vu et al., 2014).

² Monetary variables are deflated according to inflation in Portugal. We construct a price index from 2002 to 2009. 2009 is taken as the base year.