I recent ran across an OECD study (from last year) on Innovation and Knowledge-Intensive Service Activities:
From research and development to legal and marketing services, a wide range of knowledge-intensive service activities (KISAs) enables firms and public sector organisations to better innovate. KISAs are both sources and carriers of knowledge that influence and improve the performance of individual organisations, value chains and industry clusters across all sectors of the economy.
The study categorizes these services in four ways:
The case studies indicate that different types of KISA contribute in different ways to innovation (Table 0.1). Some KISA, such as R&D and strategic management, aid in firm renewal. Such renewal services are closely linked to innovation, but are relevant and accessible to a limited number of highly capable recipient organisations equipped with sufficient resources. Other, more routine services, such as accounting help maintain and improve existing systems and activities within organisations. Their significance for performance enhancement is highly important for most organisations. Compliance services, such as auditing and some legal services are not obviously linked with innovation, except to the extent that compliance with regulations related to health, safety, environment, etc., can stimulate innovation. Such KISA also offer an access route by which a wide range of organisations, among them the bulk of small businesses, can recognise the importance of KISA to their firm’s performance and begin to engage a broader set of KISA providers. Network services provide an important platform for knowledge exchange within formal and informal networks. They also represent a flexible resource base for the members of the network.
Table 0.1. Types of KISA and their role in innovation
Renewal services: Directly related to innovation, for instance R&D and strategic management consulting
Routine services: Contribute to improvement of maintenance and management of various subsystems within organisations, e.g. accounting
Compliance services: Help organisations to work within the legal framework and various other regulatory regimes, e.g. auditing and some legal services
Network services: Facilitate communication, knowledge exchange and flexible resource allocation,
e.g. informal personal networks and production related networks.
Among the policy recommendations were two I found particularly important:
1) innovation policy frameworks need to respond to the nontechnological aspects of KISA and their impact on innovation capability:
The traditional R&D-based approach to innovation is too narrow and that innovation policies need to recognise the various types of knowledge-intensive services activities that have different roles in the innovation processes. Policy needs to focus more on the interactive people-centred activities, less on the individual firm and more on developing the collective strength of the sector or network. Since typical KISA is mainly based on intangible assets, policies ought to secure sufficient supply of private and public financing for growth oriented KISA. Better understanding of the non-technological elements of innovation and the user contribution to innovation needs to be further developed.
2) a key challenge is improving access to KISA.
This challenge is highlighted by intangibility, complexity and difficulties in assessing the quality and suitability of the services offered prior to engaging with them. Financial assistance is only a partial solution. Awareness of KISA needs to be developed first and knowledge asymmetries between KISA suppliers and users need to be addressed, for instance, by certification of services and through publicly funded demonstration projects.
We often talk about the innovation ecosystem. It is clear that these knowledge-intensive service activities are an important part of that ecosystem – both for their own innovation activities and in how they facilitate innovation in other sectors.
The study also provides us with one more example of how the old boundaries of manufacturing and services are blurring in the I-Cubed Economy. And how we need to continue to change our mindset if we are to come up with appropriate policy responses.