Assessing the explanatory power of KIBS for

the international competitiveness of industrial

sectors

« Are we walking the lobby talk or not? »

Asier Murciego, Iñigo RdApodaca, Bart Kamp

Orkestra-Basque Institute of Competitiveness

Bilbao, 14 november 2014

bart.kamp@orkestra.deusto.es

Reported virtues of KIBS for industrial competitiveness –

Research angles from which KIBS receive attention

KIBS are good for innovation and a supplement to internal R&D and S&T support

structures:

Source of innovation and knowledge production (Miles, 2005; Muller and Zenker, 2001).

Both in the non-technological realm (NESTA, 2009)

Soft sources of knowledge and “novel practices rather than hardcore R&D

(Tether and Metcalfe, 2004)

And the technological realm (Miles, 1995; OECD, 2006)

Particularly for SMEs with last mile innovation; for whom classic S&T centres

are too high-end

KIBS are good for positioning a firm in Global Value Chains and GAV creation: “a

sub-sector consuming a high proportion of knowledge intensive services is

indicative of its strength in a GVC” (IDEA, 2013)

“The use of knowledge-intensive business services by an industry tends to correlate with

the level of gross added value of final outputs of that industry”

Moreover: whether these services are sourced locally or are imported, makes

tremendous difference for the regional anchorage of subsectors

KIBS as vitamines/engine for regional innovation systems: “KIBS are key players in

innovation systems, particularly to manufacturing competitiveness which largely

depends on knowledge contents provided by highly specialized suppliers”

(Corrocher & Cusmano, 2014)

KIBS are a defining element of innovation-oriented regions, whereas their scarcity and

slow growth distinctively characterize poor performing innovation systems

KIBS as (quasi) KET and pivots for industrial development: “KIBS as a strategic

sector to spur and diffuse transversal learning, innovation and sophistication effects

throughout industry” (Lundvall, 1992; Lorentz. et al., 2007)

Dynamic nodes of knowledge–related networks, “bridges of innovation” (Czarnitzky and

Spielkamp, 2000), “brokers” (Thomi and Böhn, 2003), interacting with the manufacturing

sector

(“Unrightfully”) left out of RIS3 discourse

Reported virtues of KIBS for industrial competitiveness –

Research angles from which KIBS receive attention

Quid presence and uptake of KIBS by Basque industry &

impact on international competitiveness?

Presence and composition of KIBS in the Basque Country v-à-v peers

2010 Percentual labour breakdown

Basque Country Spain EU-15

Whole economy

100 100 100

KIBS as a whole

7.3 6.4 7.4

Computer programming / IT services 1.4 1.2 1.5

Legal, accounting and corporate management

services

2.3 2.3 2.8

Architectural, engineering and technical essay

activities

1.9 1.6 1.4

R&D services 0.6 0.1 0.4

Advertising and market research 0.5 0.6 0.6

Other professional service activities 0,6 0,6 0,6

Quid presence and uptake of KIBS by Basque industry &

impact on international competitiveness?

KIBS employment has grown well above average, increasing by 12,06% between

2004-2010 versus 1,82% for total employment in Basque Country in same period

Notably engineering and architectural activities

Weight of KIBS employment on total grew by 10% between 2004-2010

Providing a solid basis to support industry and provide an alternative to regular S&T

circuits

Up to par with EU average, although below hotspots like Greater London, Brussels

Metropolitan area, Ile de France, CA de Madrid, …

? Who makes use of it; what explains growth: regional demand or foreign trade ?

Quid presence and uptake of KIBS by Basque industry &

impact on international competitiveness?

Use of KIBS by local industry

Largely local sales story – little use of KIBS from abroad? Difficult to export KIBS?

Higher export shares of user sectors indicates leverage effect of KIBS?

Year Domestic sales (inside BC) D Basque sales Spanish sales Export

2004 522,387 45.63% 49.09% 5.28%

2009 800,366 53% 66.67% 30.31% 3.02%

2004 846,548 76.85% 21.66% 1.49%

2009 1026,379 21% 85.38% 12.70% 1.92%

2004 192,599 46.50% 46.55% 6.95%

2009 605,511 214% 58.44% 13.23% 28.33%

2004 886,834 57.87% 33.96% 8.17%

2009 1275,914 44% 57.53% 27.22% 15.25%

2004 116,414 62.09% 28.42% 9.49%

2009 251,521 116% 71.66% 20.14% 8.20%

2004 427,565 74.37% 25.12% 0.51%

2009 412,042 -4% 64.36% 22.20% 13.44%

2004 373,293 33.44% 30.79% 35.77%

2009 242,887 -35% 80.61% 10.69% 8.70%

2004 3365,64 55.43% 33.85% 10.72%

2009 4614,62 37% 66.41% 21.62% 11.97%

2004 100 29%

2009 116,875 17% 25%

Other professional service

activities

TOTAL KIBS

Gross interior demand Basque

Economy

Computer programming / IT

Legal and accounting services

Holding activities and management

consultancy

Architectural, engineering and

technical essay activities

R&D services

Advertising and market research

Testing for correlation between « use of KIBS » –

« (international) competitiveness »

Methods / Sources:

Input-output tables 2000-2012

Regional accounts per sector on turnover and exports

KIBS:

Servicios informáticos y de información

Publicidad y marketing

Investigación y desarrollo

Arquitectura e ingeniería

Rationale/hypothesis for research:

If: KIBS are good for competitiveness of firms & industries

Then: the consumption of KIBS should have an impact on sectoral performance /

competitiveness indicators of those sectors consuming KIBS, a.o. measured in

terms of their turnover and export figures

Testing for correlation between « use of KIBS » –

« (international) competitiveness »

Industrial sectors:

● Madera y corchopán

● Industria del papel

● Refino de petróleo

● Química básica

● Química final

● Productos de caucho y plástico

● Fabricación de minerales no metalicos

● Siderurgia y producción de metales no férreos

● Molinos de hierro y acero

● Automoción

● Máquina Herramienta

● Equipamiento de ferrocarril

● Montacargas y grúas

Choice of sectors:

Dynamism

Export profile

Relevance to Basque

economy (employment-

wise; GAV-wise)

Testing for correlation use of KIBS – international

competitiveness Results

Spearman correlation (non parametric, small samples)

Average of correlations for the period 2000-2012

x y 0 year delay 1 year delay 2 year delay

kibs_total exports 0.680 0.676 0.667

kibs_total turnover 0.818 0.802 0.797

kibs_sh exports_sh_turnover 0.314 0.308 0.307

kibs_sh exports_growth 0.082 0.009 0.173

kibs_growth exports_growth 0.313 -0.045 -0.019

Variables

kibs_total: sector kibs consumption in thousand €

kibs_sh: share of kibs in total consumption of sector

kibs_growth: growth of kibs consumption in sector

exports: sector exports in th. €

turnover: sector turnover in th. €

exports_sh_turnover: share of exports on turnover

exports_growth: sector exports growth

Quid presence and uptake of KIBS by Basque industry &

impact on international competitiveness?

KIBS as underpinner for (international) competitiveness?

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turnover kibs

Source: Eustat Note: All units in € thousands

Quid presence and uptake of KIBS by Basque industry &

impact on international competitiveness?

KIBS as underpinner for (international) competitiveness?

Source: Eustat Note: All units in € thousands

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exports kibs

Implications/Postulations

A strong industry benefits from a sound KIBS basis

Re-industrialization/revitalization of industry (also) requires KIBS

If economies with a strong industrial basis are resilient in the wake of crisis, it is

not just because they resisted a shift to tertiarization

“Instead”, it may be because they developed a supportive KIBS sector to underpin

industrial development

Allowing them to move into more sophisticated product territory (and PSS)

Stay on the cutting edge of their field

Undertake smart specialization at territorial level

KIBS can thus contribute to avoid footlooseness theses

Lot of local-for-local b2b relationships going on

Implications/Postulations

The relation seems proportional, though

Not necessarily multiplier-wise

(reverse) causality may be in play

1st law of H.H. Gossen:

diminishing marginal utility

Saturation may be at play

Implications/Postulations

The relation R&D expenses-growth is not linear and there are alternatives to

S&T-oriented innovation (cfr. DUI modes)

KIBS are highly interaction and high encounter-based and as such our work-in-

progress provides endorsement to think that an alternative or parallel road to support

industrial competitiveness exists

Optimum KIBS uptake ratio?

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

KIBS / Total inter-mediate consum-ption

3,8% 3,8% 3,6% 3,7% 3,7% 3,3% 3,3% 3,3% 3,3% 3,4% 3,8% 3,9% 3,7%

Limitations

Tested at level of single region only

Bias towards dynamic sectors

although some in decline: paper

Aggregated results: breakdown needed, also to corroborate results

Quantitative exercise to benefit from qualitative analyses

see whether subjects of study agree with derivations from figures

and can help to shed light on causal mechanisms and on direction between

(in)dependent variables