Knowledge Intensive Business Services: The Russian Experience

Knowledge-Intensive Business Services (KIBS) are seen to be a core sector of the so-called ‘knowledge economy’, and already play an important role in developed economies. They a both innovate themselves and provide their clients with knowledge and learning opportunities. This paper examines the status of KIBS in Russia, and explores some key issues in their role in innovation using data from surveys of KIBS firms and their clients in Russia. We note that KIBS are often highly customized, and many new services prove difficult to replicate. KIBS are closely tailored to solving the problems of specific customers, and thus these services typically involve KIBS consumers in a co-production process. Both the formal supplier and the formal user of the service are engaged together in service production, allowing for mutual knowledge transfers and learning. Using KIBS is shown to affect customers’ propensity to innovate, confirming the importance of this sector for the innovation system. Survey data suggest that the impact on innovation is, as a rule, positive and strong. The propensity to innovate in turn stimulates further consumption of KIBS, which is therefore the start of a self-sustaining growth mechanism of innovation activity. Similar consequences are conceptually associated with knowledge transfer in the course of co-production: consumers get both specialized and general knowledge, improving their skills and increasing the innovative capacities. This enables customers to better understand their own needs and encourages them to consume more customized KIBS in the future, and producing KIBS companies get the opportunity to become effective elements of innovation systems. Authorities should consider the possibility of fostering innovative development by supporting the sector in question.