‘Do versus Buy’ Decisions in the Demand for Knowledge Intensive Business Services

Abstract

The search for the maximum use of scale and agglomeration economies and the need to operate firms in the most flexible way have provided a strong impulse for companies to increase their use of external intermediate services. Because of their strategic role, the use of business services that are intensive both in labour qualification and in technological requirements is key for these policies. The purpose of this paper is to analyse the patterns followed by companies in the two relevant decisions on this issue: firstly, whether to use knowledge intensive business services or not and, secondly, whether (and to what extent) to buy these services from another firm or to provide them inside the organisation. In both cases, we intend to identify the factors that affect the ‘do versus buy’ decision with respect to total KIBS as well as particular categories. A specific feature in our study is that it focuses on the behaviour of firms working in a region without a well-developed supply of KIBS. Applying discrete response models to the data obtained in a survey elaborated by the authors, the most relevant variables for the use of KIBS are satisfaction with previous outsourcing experiences and location of the firm in a large urban centre, but they do not affect their external provision. The size of the firm, its export orientation and its technological complexity have opposite effects on use and outsourcing.

ACKNOWLEDGEMENTS

This research has been possible thanks to the funding of the Regional Department of Economy, Treasury and Employment for the project ‘Servicios Avanzados y Territorio en Aragón’, through Fundación de Economía Aragonesa.

Notes

1. This is not surprising, given the extraordinary concentration of the sector in Madrid and Catalonia (which together account for 50% of national employment in the sector). According to Martínez and Rubiera [2006], Aragon is the 13th region (of a total of 17) in terms of specialisation in advanced business services. The trend towards asymmetric location is again extreme within the region: Zaragoza has around 60% of regional employment, but more than 80% of the jobs in business services are concentrated in the city. See Pardos and Gómez-Loscos [2003] and Pardos, Rubiera and Gómez Loscos [2005] for further details.

2. The literature on this topic is very extensive; however, we recommend the synthesis presented in Daniels and Moulaert [1991] and in Illeris [1996]. For Spain, see Martínez and Rubiera [1999].

3. Only 390 firms included employment data and only 254 specified their turnover. The database of the Aragonese Chambers of Commerce was used as the framework for designing our population. Though less complete and refined than other databases, it offers a great number of firms belonging to each sector (we extracted 2,835 firms from a total of 45,000). The sample was large enough to obtain a satisfactory response rate.

4. Instead of our variable Zaragoza to capture the effect of operating in a large urban centre, a variable to distinguish between the three provinces was incorporated, but it was found to be insignificant.

Additional information

Notes on contributors

Eva Pardos

Eva Pardos is Lecturer at the University of Zaragoza, Applied Economics Department, Facultad de CC.EE, Gran Vía 2, 50005 Zaragoza, Spain. Email: [email protected]

Ana Gómez-Loscos

Ana Gómez is Head Researcher at Fundación Economía Aragonesa, Costa 9, 50001 Zaragoza, Spain. Email: [email protected]

Fernando Rubiera-Morollón

Fernando Rubiera-Morollón is Assistant Professor at the University of Oviedo, Department of Applied Economics, Facultad de CC.EE, Avda. del Cristo S/N, 33006 Oviedo, Spain. Email: [email protected]