A TALE OF TWO SECTORS - Issues in the Mapping of Knowledge Intensive Business Services

INTRODUCTION This paper addresses two kinds of difficulty embedded in innovation data and innovation thinking. First, 'sector' is a deeply entrenched and familiar mapping principle. The dominant industrial classifications, which frame a large part of the data collection activity that supports policy making, are sectoral. However, there are difficulties associated with 'sector' as a basic framing concept, which the present paper explores in a context of changing policy orientations, dynamic relations between firms and markets, and increasingly significant trade in knowledge-intensive services. Second, innovation thinking has had a (largely tacit) manufacturing orientation. The paper illustrates ways in which this legacy may be put into a broader perspective, taking into account both shifts in manufacturing practice and strategy (an increased focus on the service content of manufacturing production, and on innovation in business practice as distinct from innovation in equipment) and emergent trends in service-aware innovation theory. Part of this paper's background lies in operational difficulties of national statistics, the economics of large-scale routine data collection and the technology of macroeconomic analysis. Unfortunately, it is near impossible to map interactions between knowledge-intensive business services (KIBS) and specific sectors, using existing macro-level national data. Mapping and measuring of services is fundamentally difficult both because they are a residual category in classifications of industrial activity and because they are changing significantly in both structure and function. Some of the most dynamic business services activities appear in residual sub-categories within (residual) service categories. Business services (producer services) are the most rapidly growing service subsectors in European national profiles. However, the category is heterogeneous and its interpretation varies between countries; also not all its sub-categories share the impressive overall growth pattern. Often the most dynamic growth is in sub-categories with a rather small overall share in trade and employment. Even the most elaborate form of the data available does not allow a European-level analysis of the role of producer services (firm-to-firm services) specialised in supplying manufacturing sectors (eg design services, manufacturing consultancy services). These issues are discussed further at a general level by Preissl (Preissl, 1997). The present paper takes the limitations for granted, and explores what might usefully be mapped rather than what may be determined using existing statistics. The work underlying this paper was carried out within the framework of the SI4S project (Services in Innovation, Innovation in Services) 1. As a contribution to the 'services in innovation' strand of SI4S, CENTRIM agreed …