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

Regional innovation strategies form the framework for the development of KIBS also in Southern Ostrobothnia. This region is quite far from the metropolitan area, and its KIBS sector is much less developed than in big cities. Also the awareness of clients about the benefits that result from the use of KIBS is weaker, the majority of clients being very small enterprises.

In Ostrobothnia, the regional polytechnic, (3) municipalities and some existing clients of KIBS established in 2004 a consulting company Emineo Ltd to facilitate the tackling of these issues. This company organises contacts between KIBS and clients, and familiarises small companies with the use of external services. In the KIBS sectors where the lack of services is worst, Emineo also functions as a service provider. Until now, this role has been needed particularly in technology-based consultancy services. Before the establishment of Emineo, the corresponding activities had already been piloted in a publicly funded development project.

In order to get more detailed information of the capability of KIBS in serving SMEs, an interview study was carried out in Ostrobothnia. The study focused on two client industries which are important in this region: the metal industry and the manufacture of furniture. In addition to research targets, the aim was to create new contacts with KIBS' clients. The study was implemented by the research institute (SC-Research) linked to the regional polytechnic, and was funded by Tekes, the regional council and Emineo. The study showed that the use of KIBS is concentrated on the most innovative companies. It also revealed that the lack of awareness about KIBS is partially due to the fact that KIBS do not actively market their services.

All in all, the results confirmed the good sense of the activities initiated: the strengthening of regional networks and the familiarising of small clients with KIBS. The efficient use of intermediaries in the dissemination of information about KIBS is particularly emphasised in the conclusions of the study. The study also warned against one-sided views of local ties: acquiring KIBS services outside the region should be supported, too, particularly in the case of highly specialised services (Saarivirta et al. 2006). According to the study, the stakeholders in Ostrobothnia judge that the ties of KIBS to the regional innovation system are tight and versatile.

Savo

The situation is different in the Savo region, which has also carried out its own KIBS study. The main focus of this study was on the exploration of the nature of innovation activities in micro and small KIBS. The study was conducted via a postal and telephone survey with a sample size of 213 (return rate 19%). The results showed that the contacts of KIBS with the actors of the innovation system were limited. All in all, the innovation activities of regional KIBS concentrated on small in-house improvements. Innovations whose aim would be the development of market relations and networking were more rare. There was also little emphasis on the renewal of service products, e.g. through commodification (Pietikainen et al. 2006).

As in most other regions, in Northern Savo the regional polytechnic has played a central role in taking the initiative for the development of KIBS. Because the study has been finalised recently, there are only preliminary plans for practical policy operations. These plans are in many respects similar with the plans and activities of other regions and they include some common elements with the 'Serve' programme, too. The need to stimulate the demand for KIBS can be mentioned as an example. The development plans also aim to answer the issues revealed by the regional study: increasing commodification and networked business in KIBS, as well as tightening the linkage of KIBS to the innovation system and to the development of regional clusters, are thus mentioned as primary goals.

CONCLUDING DISCUSSION

Our exploration shows that a research-based approach is characteristic of Finnish KIBS policies both at the national and the regional levels. International KIBS studies which have revealed the importance of KIBS and the challenges in their development have motivated supporting activities and formed the starting point for them. These studies have been supplemented with nation- and region-specific statistical surveys and interviews, which have helped to identify development needs in a concrete way. Each of the four regions included in our examination had carried out its own KIBS study/studies.

Considering the development of KIBS as a part of innovation policy is another common feature in the Finnish activities. At the national level, KIBS are supported in the framework of the 'Serve--Innovative Services' programme carried out by Tekes, The Finnish Funding Agency for Technology and Innovation'. At the regional level, KIBS have been explicitly linked to the innovation systems thinking: the need to include the development of KIBS into the regional innovation strategies was emphasised both in big cities and in more remote regions. The situation varied regarding the degree to which linkages between KIBS and the regional innovation system already exist--one region evaluated these linkages to be tight and versatile, another judged their increase to be a central challenge. Reasons for these kinds of differences are an important topic for further studies.

The concrete ways in which the KIBS sector has been developed (or was planned to be developed) include a variety of measures. In the 'Serve' programme Tekes has applied quite a systematic approach where a vision of KIBS' role in the Finnish economy has first been formulated. The next step has been the definition of strategies and focuses, and the final step the establishment of guiding principles for the selection of projects to be funded. In the regions, where the development resources are considerably smaller, the approach has usually been the identification of some 'key measure'. Providing physical facilities (a 'KIBS centre'), maintaining a KIBS incubator and establishing a development company are typical examples.

The use of a development company as a central actor in the implementation of KIBS policies is an interesting solution. It played an important role in two regions, one being a big city and the other a rural area with a small town. The companies promoted the birth of new KIBS, supported the development of services in existing KIBS, organised contacts between KIBS and clients, and familiarised small companies with the use of external services. In both areas the companies also provided KIBS services themselves, thus stimulating further business activity in this sector and filling gaps in the service supply. Another interesting observation in this study was the central role of regional polytechnics in the development of KIBS: in the two remote regions they had carried out KIBS studies, and 'the KIBS centre' in the metropolitan region was an initiative of a polytechnic.

The targets of development include both supply-and demand-centred activities. Tekes as well as regional stakeholders emphasised that they direct stimulating and supporting measures not only towards KIBS, but also to their clients. Further, the aims of development are both quantitative and qualitative. Concerning the supply of KIBS, the primary goal at the national level is an increase in non-technological KIBS, whose number in Finland is smaller than the average in Europe. As regards demand for KIBS, growth opportunities have been judged to exist particularly in other service firms, in the public sector and in manufacturing SMEs. On the qualitative side, Tekes and the regions focus particularly on the promotion of commodification, networking and internationalisation in KIBS. KIBS' clients are supported in the development of (out)sourcing skills which include, among others, carefully defining the assignment, finding an appropriate service provider, and managing the co-operative relationship.

The policy operations initiated in Finland are in many respects similar with the conclusions of the OECD's KISA study. This study emphasised four points in particular. Firstly, it is essential to secure the continuous emergence of research-based knowledge and the availability of a highly skilled labour force as these are the lifeblood of KISA. Secondly, innovation policy frameworks should pay more attention to the non-technological aspects of KISA. Thirdly, a key challenge is improving the access to KISA--the policies that stimulate the demand can also trigger enhanced supply and quality of KISA. Fourthly, policies must adapt to changing needs for KISA. (OECD 2006) In the analysis of the Finnish activities, the second and third points--the development of non-technological services and demand-oriented activities--are clearly observable. Some regional efforts have also tackled the issues of the labour force and its skills. Finally, two foresight studies have been carried out in the Finnish KIBS sector, and their findings of the changing needs for expert services have been used in the selection of developmental targets.