Does distance really matter? Assessing the impact of KIBS proximity on firms’ servitization capacity: evidence from the Basque country

Servitization strategy is becoming increasingly recognized as a key source of value with important competitive and economic implications across the globe. It has been proven to contribute to territorial performance through the provision of services to manufacturing businesses. However, this contribution has largely been the consequence of the configuration of local industrial structures, and most importantly, of the interconnectedness between manufacturing firms and knowledge-intensive business service (KIBS) firms. Hence, the process of territorial servitization is highly conditioned by the association between manufacturing businesses and KIBS firms. To date, the literature on territorial servitization has mostly described the implications of KIBS firms for service deployment and service innovation in manufacturing, with knowledge and technological capabilities being considered the main variables in its success. Nevertheless, the literature is silent on how the geographical distance between KIBS firms and manufacturing companies may affect servitization capacity. This paper aims to raise the importance of the geographical distance of KIBS firms in manufacturers’ servitization capacity. To meet this aim, an analysis of two manufacturing companies; Alpha and Beta, is provided. They are both located in the Basque country but collaborate with KIBS firms located in different geographical areas, either “inside” or “outside” the Basque region. Through a qualitative study based on (i) measuring these firms’ capacity for servitization, and (ii) in-depth interviews, results suggest that geographical distance plays a key role in the KIBS firm-Manufacturer relationship for servitization capacity purposes, and should be regards as an important aspect for successful territorial servitization.