Innovation policy in services: The development of knowledge-intensive business services (KIBS) in Finland.

The development of new, efficient business models is also crucial. In the case of KIBS, 'Serve' promotes networking and internationalisation, in particular. Through networking, small and medium-sized KIBS can provide versatile service solutions and survive amidst tight competition. Internationalisation has been considered to be a central factor for the dynamic development of the whole KIBS sector (Kox 2002). In addition, the internationalisation of KIBS has been argued to have important implications for the general competitiveness of firms, regions and countries (Miozzo & Miles 2003).

In Finland, no systematic statistics exist to demonstrate the internationalisation of KIBS, but many individual pieces of information indicate that it is not very high. For instance, Swedish and Danish KIBS occupy an important position among the foreign KIBS in Finland (in addition to KIBS from the US, the UK and other big countries), but Finnish KIBS are not visible in the corresponding lists of neighbouring countries (Eurostat 2004b).

As regards the use of KIBS, the first step in the development is to increase understanding of the different tasks that a skilful purchase of external expert services requires. The following tasks can be identified (cf. OECD 2006):

* recognising the need for a service;

* defining the content of the assignment;

* finding and selecting an appropriate service provider;

* managing the co-operative relationship during the service provision;

* absorbing the new knowledge and putting the outcomes of the service into use;

* evaluating the service process and the outcomes.

Demanding clients have an essential impact on the service quality in KIBS. Thus, the 'Serve' programme supports projects that are initiated by KIBS and their clients together. The shorter experience in the use of external expertise in service sectors is taken into account again. The programme emphasises the improvement of purchasing know-how in service companies and in public organisations. Developing the management of tendering practices is an example of the concrete issues to be tackled.

The way in which the 'Serve' programme links the above-described developmental needs and goals to the selection of the project types to be supported involves three steps: the formulation of a vision, the definition of strategies and focuses, and the establishment of guiding principles for implementation. Figure 1 summarises these steps (source: a memorandum of the 'Serve' programme).

In the vision for the development of the Finnish KIBS-sector, the quantitative sufficiency of KIBS, as well as their versatility and capability in international markets are highlighted. Strategies focus on innovative products and working practices in KIBS; the development of skilful (out)sourcing amongst their clients; and on quantitative increase in the use of KIBS. The practical support to be offered in the framework of 'Serve' concentrates especially on three types of projects:

1. innovative projects of existing KIBS, value-adding and replicable solutions being favoured in the first place;

2. projects targeted to the establishment of new KIBS, the focus being on KIBS which specialise in the issues of service sectors or the public sector (e.g. the PPP-models), or which provide comprehensive networked services;

3. common projects of clients and KIBS which intend to develop new innovative models of co-production.

[FIGURE 1 OMITTED]

Regional activities

Tampere

The first regional KIBS study in Finland was carried out in Tampere, the biggest regional centre in Finland outside the metropolitan area (Kautonen et al. 1998). The study revealed that the KIBS sector in this region is even more dominated by technologically oriented KIBS than averagely in Finland. The share of engineering services to support manufacturing is high in particular. Tampere has been one of the most important centres of traditional manufacturing in Finland, and even though its industrial structure has radically changed during the last decades, the composition of KIBS still reflects the needs of earlier times. Thus, one of the main actions required was to increase the versatility of expert services in the region. The first KIBS study was updated six years later (Kautonen et al. 2004). A new topic in this study was the futures of KIBS, particularly from the viewpoint of internationalisation. The study also included the activity-based approach (KISA) besides the KIBS perspective.

A development programme in the KIBS sector was started soon after the first study--Tampere was the first region in Finland also regarding the implementation of KIBS policies. A development company Professia Ltd has played a central role here. The company was established in 2000 in the form of public--private partnership by the City of Tampere, the University of Tampere and two financial organisations; later on its ownership basis has extended to cover several private companies, too.

Professia's mission has been both to promote the birth of new KIBS and to support the development of new services and service quality in existing KIBS. Professia managers a KIBS incubator targeted to all kinds of KIBS and carries out specific efforts for the creation of new KIBS in the IT sector. Until now some twenty KIBS have started their business within the incubator. Professia itself has also started to provide KIBS services; by engaging itself in this business it intends to open the way for other KIBS in the region. Disseminating information about KIBS is included in the remit of Professia, too. Finally, the company has been elemental in the development of KIBS research at the two universities in Tampere. Figure 2 summarises the activities of Professia.

[FIGURE 2 OMITTED]

Helsinki

In the Helsinki metropolitan region, the developmental activities in the KIBS sector started in 2003, the main organiser being Culminatum, the Helsinki Region Centre of Expertise. Also here, a regional study was first carried out (Lith et al. 2005). The study included a statistical survey which consisted of regional data and of some comparative material from other metropolitan regions in Europe. The second part of the study was based on interviews of KIBS and their clients and focused on the relationship of KIBS to innovation. The main issue was how KIBS could support the development of business in those client industries which are based on emerging technologies. The client sectors studied were those belonging to the national Centre of Expertise programme in the Helsinki region during 1999-2006: software; logistics; gene technology and molecular biology; medical and welfare technology; adaptive materials and microsystems; and digital media, content production and learning services. In addition to the linkage to the Centre of Expertise programme, the study was included in the Urban Programme of the Helsinki metropolitan region.

The study showed that companies in new technologies regard KIBS as important for their future development. However, new companies are usually small and do not have the resources to use KIBS even when they are well aware of the need. KIBS themselves also often prefer large or middle-sized clients because these provide higher profits.

The small size of the Finnish economy causes some additional difficulties. Domestic markets tend to be too small to stimulate the establishment of KIBS that would understand the specific issues of gene technology or adaptive materials, for example. Consequently, clients in new technologies often wish to acquire KIBS services from other countries. However, finding information about suitable service providers and developing intensive service relationships are not easy internationally (Lith et al. 2005).

Since the initial study, Culminatum has started a developmental project which is funded by the Regional Council and the Employment and Economic Development Centre of the Helsinki region. The project focuses on three specific issues: the commodification of KIBS' services, the internationalisation of KIBS and the development of (out)sourcing skills of KIBS' clients. As these issues are largely similar to those of the 'Serve' programme, the regional project is interacting with 'Serve' in order to avoid overlapping and to build mutually reinforcing impacts. Some pilot projects for producing best practice examples of commodification have started, and a tool box which supports the pilots and collates the experience is planned.

Secondly, plans for the development of KIBS in the Helsinki region are included in the regional innovation strategy, which was commenced in 2005. This strategy particularly concerns the region surrounding the core metropolitan area and is led by Laurea, one of the region's polytechnics. The interest regarding the development of KIBS is more local in this strategy than in Culminatum's project. One interesting example of a concrete initiative is a 'KIBS centre', a building in a small city outside the core metropolitan area, which hosts different kinds of KIBS. The idea is that physical facilities would stimulate the birth of new KIBS and the common environment would support their interaction and mutual learning. The centre functions in close cooperation with Laurea in order to increase the flow of information about labour needs and skills requirements from KIBS to educators.

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