Organization of Knowledge and Innovation: The Case of Finnish Business Services

Industry and Innovation, Jun 2005 by Leiponen, Aija

Results concerning the main variables of interest, the knowledge strategy variables from the earlier factor analysis, also show differences across the dependent variables, as expected. Both probability of service innovations and sales from these innovations benefit most strongly from external knowledge obtained from customers and competitors. Coefficients for this variable are significant at the 1 per cent level in the two equations. This variable is only weakly significant for service improvements. For service improvements, the internal cooperation factor is highly significant and positively related to the dependent variable. In contrast, technology adoption and incremental learning are in most cases negatively associated with service improvements and innovations, although the coefficients are not statistically significant.

To summarize the results, the evidence supports the first and second hypotheses. First, collective application of knowledge as measured by investments in training to support internal cooperation, knowledge residing in teams, and investments in marketing, are more conducive to innovation than individually based knowledge as measured by the incremental learning factor. Second, external knowledge sourcing from customers and competitors helps to bring about more significant service innovations and perhaps larger innovations as indicated by the sales from innovative services. In this analysis, the result that scientific knowledge is negatively associated with more significant innovations is surprising and contrary to results on manufacturing industries (Leiponen, 2002). Finally, Barras' conjecture about the role of technology adoption as a driver of service innovation was not supported, in fact, technology-adopting supplierdominated companies in the sample tend to be less innovative, although these results are not statistically significant.

5. Discussion and Concluding Remarks

This paper examines the characteristics of innovative knowledge-intensive business service (KIBS) firms. The focus is on how firms organize their knowledge creation activities, controlling for firm size, group structure, R&D investments, and the education level of employees. Survey data of 167 Finnish business service firms is used to conduct empirical analyses. First, an exploratory factor analysis identifies five distinct factors that jointly explain more than 60 per cent of the variation in the data-set. These factors are then introduced in regression analyses of innovation outcomes. Indicators for innovation include market introduction of significantly improved services and market introduction of completely new kinds of services, which are binary indicators, and sales from new services, which is a continuous variable measuring the extent of innovation. Similar measures are utilized in the European Community Innovation Survey questionnaires.

Qualitative survey information used in the factor analysis consists of two of the possible goals for in-house training programs, four external sources of information for service development, and five of the possible drivers of the firm's competitiveness as perceived by the general manager. These data enable identifying orthogonal dimensions in the data that emphasize internal cooperation; external sourcing of information from customers and competitors; technology adoption; learning on the job; and external sourcing of information from universities.