Drivers for innovation in KIBS: evidence from Russia

ABSTRACT

Knowledge-intensive business services (KIBS) significantly contribute to the economic growth and competitive advantage of emerging markets, including Silk Road countries. KIBS are not only intermediaries that transfer knowledge through the economy but are also innovators themselves. This paper aims to explore how major innovation drivers influence the implementation of innovation in KIBS. Using a sample of 519 KIBS enterprises from Russia, the results show that human capital increases the implementation of technological innovation, while the link between standardisation and technological innovations is non-linear (an inverted U-shaped). In addition, the multiregional branch network promotes the implementation of all types of innovation, while advertising investments enhance the implementation of technological and marketing ones. These results help to provide some practical suggestions for both innovation managers and policy-makers.

KEYWORDS:

• Service industries
• knowledge-intensive business services
• KIBS
• innovation
• Silk Road

Acknowledgement

The work was prepared within the framework of the Basic Research Program at the National Research University Higher School of Economics and supported within the framework of a subsidy by the Russian Academic Excellence Project ‘5-100’. The authors also gratefully acknowledge the valuable comments by anonymous reviewers.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Including Silk Road countries (China, India, Iran and Turkey).

2 Including Silk Road countries (Kazakhstan, Kyrgyzstan, Russia and Uzbekistan).

3 Including three major Silk Road countries in terms of GDP (Russia, India, China).

4 Though banking does supply services to business, and is quite knowledge-intensive, it is also an industry with much use by consumers. Schnabl and Zenker (2013) suggested that knowledge-intensity alone does not mean that financial services should not be included in the KIBS sector; Pina (2015) argued that merchant or investment banking are KIBS – though in practice it can be difficult to split these functions from retail banks empirically.

5 In this case, personnel costs include also direct expenditures like wages, salaries, bonuses, etc., but does not cover expenses on human resource development, that were included into a separate category.

6 For example, Howells et al. (2004) reported that only 8% of manufacturing firms focused on organisational innovations, while in services 37% of enterprises were concentrated only on the organisational changes. Later, Gotsch et al. (2011) found that in the mid-2000s the gap between the share of European KIBS implemented organisational innovations and their manufacturing counterparts was more than 20 percentage points. Behrens et al. (2017) demonstrated knowledge-intensive services (including KIBS) to be more disposed to introduce organisational innovations than other services as well as mining, energy and non R&D intensive manufacturing.

7 Advertising, audit and accountancy, development and real estate services, engineering, b2b financial intermediation (trust management, financial consulting, investment attraction, brokerage and trading services, leasing and factoring), human resources consulting, informational communication consulting, information technology, legal services, web and digital services.

8 In services, it may be difficult to differentiate between product and process innovation because the service is usually produced and consumed simultaneously. Based on González-Blanco, Coca-Pérez, and Guisado-González (2019), we consider both product and process innovations as parts of a single group of technological innovations.

9 Including advertising; architectural, engineering and other technical activities; building maintenance and support; data processing; leasing; legal, accounting and auditing activities; market research and public opinion polling; R&D services, computer programming and related services.

10 China, India, Iran, Turkey and Russia.

11 This classification is close to those used by OECD/Eurostat for small (from 10 to 49 employees), medium (from 50 to 249 employees) and large (more than 250 employees) enterprises. In addition, for robustness check we also include the variable that reflects how the company perceive its’ relative size itself.