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Innovation in the cooperation between KIBS and small and medium-sized

enterprises: an explorative study

III. International Business Servitization Conference (13-14 November 2014, Bilbao, Spain)

Daniel Feser

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Research Question

• Regional Innovation Systems are relevant space for SMEs (Sternberg, 1999)

-> growth of ICT (Thomi and Böhn, 2003) and importance of service innovation/servitization (Sakata et al. 2013; Vandermerve and Rada, 1988)

• KIBS are key in the RIS (Muller and Zenker, 2001)

• Research Question: ‚Why‘ and ‚how‘ use SMEs KIBS for innovation?

Exploring a new field

Introduction

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Types of KIBS use

Category Service type

Identification of high value knowledge Identification of technological and equipment requirements

Identification of R&D needs

Consulting services for access to technology, patents, etc.

Knowledge validation Consulting services for business plan preparation

Assistance with prototype design or technological feasibility test

Consulting services for patent preparation

Certification of product or process safety

Implementation Consulting services for improving management processes

Consulting services for implementing process or bringing a product to line

Consulting services for accessing capital or financing

Financial services

Commercialization Support services/implementation

Consulting services for commercialization or marketing

Human resource management services

Services offered by lawyer or notary

Accounting services

Definition

(Doloreux and

Shearmur, 2013)

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Literature review

• Literature focus on innovation in KIBS (Muller and Zenker, 2001): – Transfer of Innovation

– Innovation by KIBS

– Recombination

• Focus on innovation: Positive Bias about function of KIBS For example: (Koch and Strotmann, 2008; Ferreira and Fernandes, 2011; Muller and Doloreux , 2009)

• Influence on user: Some tries, more general answers: – Muller, 2001: KIBS are responsible for diffusion and knowledge creation

in SMEs

– Evangelista et al. 2013: Positive effect on client sector

– Doloreux and Shearmur, 2013: Can rise the probability to innovate

Literature Review

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The Use of KIBS as Credence Good

• Credence goods are defined as goods with a level of quality that cannot be measured by the buyer of the specific good (Darby and Karni, 1973; Dulleck and Kerschbamer, 2006; Nelson, 1970).

Implication: market break-down, little demand for products.

• Two first indications of Innovation of KIBS as credence good:

– Innovation is an experience good (Hawkins and Davis, 2012)

– In sub-sectors the use of KIBS as credence good is analysed: Marketing (Howden and Pressey, 2008), Legal sector (Camignani and Giacomelli, 2010), Accounting (Demski, 2007).

Literature Review

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RIS of Südniedersachsen

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Methodology

• Qualitative Approach with semi-structured Questions: – SMEs create low response rate (Newby et al 2003)

– CEOs prefer human interaction (complexity of the content) (Newby et al. 2003)

– Socially desirable response behaviour (Wiggins, 1968)

• Interviews Separated in 2 parts: 1) Beginning of the cooperation

2) Innovation

• Structure: Open questions to closed question

Methodology

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Theoretical Sampling (Glaser, 1965; Glaser and Strauss, 2008)

• Aim: a brief overview of the SME-Sector in South-Lower Saxony

• Only prerequisite: Use of KIBS and innovative SME

• Diversified in sector, classification, market penetration, gatekeeper, spatial distribution

Packaging Cluster Germany 2014

Methodology

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Sample of SMEs Code Name Typology Classification Size Sector Market Gatekeeper Spatial

Distribution

Company A CCG Service-Industry Small Craft Regional HWK Urban

Company B CCG Industry Micro Manufacture of metal structures

Regional No Urban

Company C CCG Service Micro Trade Germany No Urban

Company D CCG Service-Industry Small Biotech Worldwide RES Urban

Company E SEG Service Micro Health Regional HWK Urban

Company F SEG Industry Medium Mechanical Engineering Regional HWK Rural

Company G SEG Industry Medium Casting Germany No Rural

Company H SEG Service Small Construction Regional HWK Urban

Company I SEG Service Small IT Worldwide RES Urban

Company J SEG Service Small Biotech Worldwide RES Urban

Company K SEG Service Small Medicine Worldwide RES Urban

Company L SEG Service Micro Publishing Worldwide No Urban

Company M RG Service-Industry Medium Steel Worldwide HWK Urban

Company N RG Industry Medium Special purpose machinery Worldwide HWK Rural

Company O RG Service Micro Consulting Germany RES Urban

Company P RG Industry Medium Car Industry Worldwide No Rural

Company Q RG Industry Medium Mechanical Engineering Worldwide No Rural

Company R RG Industry Medium Craft Worldwide No Rural

Company S RG Service Medium Biotech Worldwide RES Urban

Methodology

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Analysis

• Qualitative content analysis (Mayring 2000)

• Transcripts: Due to time limitations only 10 out of 19 companies were transcripted

• Codings with mixed elements (inductive/deductive)

• MAXQDA used for computer analysis

• Cross case analysis: Groups of intensity of use (Quelle) to identify innovation strategies

Methodology

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Results and theoretical Implication

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Information asymmetry before KIBS-use

Decision Process

Non-Use

Finance

Risk

Selection Process

Network (formal/informal)

Direct Contact

Recommendation of network

Recommendations

Evaluation Collection of Information

Results and theoretical Implications

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Information asymmetry after KIBS-use

1. Quality

Results and theoretical Implications

Direct

2. Profit 3. Control • Communication • Responsibility • Complexity • Knowledge spillover

Indirect

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Typology of SMEs

(1) Core Competence Group: No use for innovative purposes (no intensive selection/No interest in innovation by KIBS/CEO arranges cooperation with KIBS)

(2) Some Experience Group for innovative use (high risk in projects/negative experience leads to stopping projects/ high disruptive innovation potential)

(3) Routine Group for innovative use (Routine in using KIBS and credence situation/incremental innovation/ long-term cooperation)

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Policy Implication

• Public KIBS programmes need to be aware of credence good situation

• SEG as important group since high uncertainty by dealing with uncertainty

Research Implication • Strengthening formal networks only show indirect influence

through informal networks

• Merging research strands: Credence good research (Dulleck et al., 2006) and KIBS research

• Quantitative analysis to confirm results

• More knowledge on the effect of the credence good situation is needed

Conclusion

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Thank you for your attention!

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Typology of KIBS use: Focus on SEG Variable Sub-Variable Definition Example

Relevant

Factor for

Groups

Communication All Employees

The employees that have the need to

speak with the KIBS work with the

KIBS

All employees are involved. Very close.

They learn to know what to do

(Company N)

RG

Few Employees Only a limited number of employees

speak with the KIBS

Mostly me, partly my employees

(Company B) SEG, RG

Only CEO Only the CEO has the communication

with the KIBS

It's the CEOs task [..] like in all the SMEs

(Company E) CCG, SEG

Network Formal

Association or organised gathering of

cooperation helps to find KIBS as

cooperation partner

There is this formal network. But it

works on an informal level. (Company

P) If you go to exhibitions, it's easy to

get in contact. (Company M)

SEG, RG

Informal

Friends, acquaintances or business

partner help to find KIBS as

cooperation partner

I knew Professor () because of other

lectures. (Company H) Most of the

times it is about personal

recommendations (Company O)

CCG, SEG

Estimation of

Risk High Perceived high risk for KIBS-project

If the project would have failed, it

would be a catastrophe (Company G) CCG, SEG

Low Perceived low risk for KIBS-project

There is no risk. It's just people's

service you buy. If they are not good,

we don't buy them anymore (Company

F)

SEG, RG

Financing Not

Problematic

Financial issues play a role for

selecting KIBS

Not really.(Answer to the question: Do

you see problems in financing projects

with KIBS) (Company Q)

SEG, RG

Problematic Financial issues don't play a role for

selecting KIBS

SMEs don't have a lot of resources

(Company M) CCG, SEG

Innovation Recombination KIBS and customer firm recombine a

new innovation

Normally we recombine new

knowledge (Company P) RG

Innovation by

KIBS

KIBS offers a product that is

developed by the KIBS It's about new knowledge (Company N) RG

Transfer

KIBS transfers innovation from other

firms or sector to the customer. It's

new-to-the-firm

We don't have the capacity and the

know-how (Arguing for transfer of

innovation) (Company Q)

SEG, RG

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Factors that influence the use of KIBS by SMEs

• Risk

• Financial opportunities

• Networks

• Absorptive Capacity