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

Innovation research has traditionally focused on manufacturing sectors, despite the growing role of service industries in industrialized nations. How knowledge-intensive business service firms organize their knowledge-creation activities is examined. Survey data were collected by the Research Institute of the Finnish Economy of 167 Finnish business service firms regarding the organization of customer relationships of service firms, their internal incentive programs, and investments in learning and innovation. Data were analyzed using exploratory factor analysis combined with regression analysis, controlling for firm size, group structure, R&D investments, and education level of employees. Findings show that: (1) the collective application of knowledge is more likely than the individual application of knowledge to lead to significant improvements in services; (2) external sourcing of knowledge, especially from customers and competitors, is more conducive to service innovations than local and incremental on-the-job learning; (3) scientific knowledge is negatively related with service innovations (contrary to findings in manufacturing sectors); (4) R&D investments do not play a significant role in service innovations; and (5) hiring highly educated employees supports significant service innovations. (LKB)