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Business services and the export performances of manufacturing industries

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Abstract

This paper investigates the contribution provided by the Business service sector (BS) to the international competitiveness of manufacturing industries that acquire and use intangible intermediate inputs (in particular, those provided by two main BS sub-sectors: “Communication and computer related services” and “Other business activities”). The main empirical focus of this paper is on the “dynamic efficiency gains” brought about by the interaction of manufacturing and BS industries and, in particular, on assessing the role of BS in supporting (in a Schumpeterian fashion) various types of non-price competitive factors, the most important being the capacity of developing and introducing new products, more effective organizational innovations and new business models. The empirical analysis is based on an original data set obtained by integrating – for a selected number of EU countries - different industry level data sources, namely the OECD Input-output Tables, the OECD Structural Analysis Database and data provided by the Community Innovation Survey. The results of the empirical analysis show that BS do exert a positive impact on the international competitiveness of manufacturing industries, even though these effects vary according to the type of intermediate intangible input acquired and type of user sector.

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Notes

  1. Similar results are found also by more detailed studies at the firm level. In particular, Martinez-Fernandez 2010 illustrates the strategic role of knowledge intensive services for the success of the Australian mining industry while Mas-Verdu et al. 2011 show that KIBS are a key sector to both the creation and the diffusion of knowledge in the Spanish innovation system through input-output linkages.

  2. Bhagwati 1984 has suggested that business services appear to be a growing sector in part because firms are externalizing service activities that were formerly performed inside the firm.

  3. However, the extent to which the outsourcing of service tasks and activities by manufacturing firms represents a viable and effective strategy to reduce costs and coordination problems remains a debated issue, especially in the case of the most strategic and highly value added service functions (Bengtsson and Dabhilkar 2009; Windrum et al. 2009).

  4. KIBS are usually identified in a sub section of the NACE 74 Business service branch and include the following services activities: Legal, accounting, tax consultancy, market research, auditing, opinion polling, management consultancy, architectural, engineering and technical consultancy, technical testing and analyses, advertising, other business activities n.e.c. (Muller and Doloreux 2009; Miles 2012).

  5. See also Muller and Doloreux 2009, for a review of the literature on KIBS.

  6. For a detailed study on the extent and the modalities of knowledge exchange between KIBS and their clients see also Landry et al. 2012.

  7. For a review of this stream of literature, see Evangelista et al. 2013.

  8. This stream of literature follows the so-called “technology gap approach to trade” opened up by the pioneering contribution of Luc Soete 1981 in which market shares (absolute competitive advantage) and trade specialization (relative competitive advantage) of countries were associated with patent based indexes of technological competitiveness of the different economies and has been further developed using a wider range of technological indicators, taking into account the dynamic nature of the relationship and the importance played by sector and country specific factors (Fagerberg 1988; Amendola et al. 1993; Magnier and Toujas-Bernate 1994; Amable and Verspagen 1995; Verspagen and Wakelin 1997; Anderton 1999; Carlin et al. 2001; Montobbio 2003).

  9. Laursen and Meliciani 2010 have analyzed the role of ICTs knowledge flows on international competitiveness using bibliometric data.

  10. As far as we know, there are only a couple of studies that have examined the impact of services in general and BS in particular on the international competitiveness of the sectors purchasing and using intermediate intangible inputs. Francois and Woerz 2008 examine for a selection of OECD countries (during the 1994–2004 period) the impact of services’ imports on manufacturing exports, distinguishing between different types of services and importing industries. The study finds a strong positive association for the most skill-and-technology-intensive industries, a negative correlation in the case of labor intensive industries and no relationship in the case of resource intensive sectors. Wolfmayr 2008 estimates (for 16 OECD countries over the 1995–2000 period) the impact of the acquisition of services in general (and KIBS in particular) on the export performances of downstream industries. The study finds that the interconnectivity between the manufacturing sectors and the service sector has a positive and highly significant impact on export market shares only in the case of high-skilled, technology-driven industries.

  11. CIS data are those elaborated by the University of Urbino for the SIEPI/SI database. Compared to the CIS data made available by EUROSTAT, the SIEPI/SI data set provides a wider set of CIS indicators at industry 2digit level and for three different CIS waves (Pianta et al. 2011). In this study, we use only CIS3 and CIS4 data, those covering the periods 1998–2000 and 2002–2004.

  12. Total innovation expenditure includes the total expenditure for four categories: intramural In-House R&D (includes capital expenditures on buildings and equipment specifically for R&D), acquisition of R&D (extramural R&D), acquisition of machinery, equipment and software (excludes expenditures on equipment for R&D) and acquisition of other external knowledge.

  13. More generally, the complementary and/or supporting role that ICT service inputs play with respect to the internal innovation efforts of manufacturing firms emerges from the analysis of the correlation coefficients (not reported but available on request) between the use of these inputs and various innovation indicators, and in particular those measuring the R&D intensity of down-stream industries and the importance attached to strategies aiming at improving product quality or extending/entering into new markets. These correlation coefficients remain positive and significant, controlling for the presence of industry (Pavitt) and country fixed effects.

  14. In the empirical analysis, this effect will be partly captured by cost variables.

  15. Innovative expenditures are more reliable than innovative output data (i.e., the share of turnover due to innovative products), especially in services sector (Evangelista and Sirilli 1995).

  16. The basic idea behind our “innovation-weighted BS intensity indicator” is similar to that adopted by Papaconstantinou et al. 1998 in order to measure embodied technology diffusion across sectors. In this study, the technology embodied in a product of an industry is computed as the sum of its own R&D and that which is embodied in its purchases from other industries (as direct and indirect purchases of intermediate inputs and domestic investments). In our paper, rather than focusing on R&D, we consider direct flows of innovation-weighted BS inputs to client industries.

  17. This is due to data constraints and, in particular, to the fact that CIS data for Germany (CIS 3, 2000) on total turnover and total innovative costs are not available at 2 digit level in SIEPI/SI database (and, as already pointed out, not provided by EUROSTAT).

  18. Export shares are built by dividing export values in each sector and country by the sum of exports of countries in each sector; the sum of export shares for each sector is thus one.

  19. The different results of the unit labor cost variable (lower unit labor costs help increasing export shares) and the variable capturing the strategies aiming at reducing labor costs (these strategies are either ineffective or counter-productive) can be explained considering that lower unit labor costs might depend not only on lower employees’ remuneration but also on higher labor productivity. Moreover, strategies devoted to reduce labor costs might signal the difficulty to compete in domestic and international markets.

  20. The lack of statistical significance of the labor cost (wage) coefficient in low-tech industries might be explained by the fact that this variable might capture in these industries not only a cost-related competitive factor but also the quality/skill content of employees.

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Authors and Affiliations

  1. University of Camerino (IT), Piazza Cavour 19, 62032, Camerino, Italy

    Rinaldo Evangelista

  2. Istat (Italian Statistical Office) and University of Urbino (IT), Via A. Saffi 42, 61029, Urbino, Italy

    Matteo Lucchese

  3. University of Teramo (IT), Campus Coste S. Agostino, Via R. Balzarini, 1, 64100, Teramo, Italy

    Valentina Meliciani

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  1. Rinaldo Evangelista
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  2. Matteo Lucchese
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  3. Valentina Meliciani
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Correspondence to Rinaldo Evangelista.

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Table 9

Table 9 Sectors (with Nace code) and Pavitt’s industry groups
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Evangelista, R., Lucchese, M. & Meliciani, V. Business services and the export performances of manufacturing industries. J Evol Econ 25, 959–981 (2015). https://doi.org/10.1007/s00191-015-0400-1

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