INNOVATION AS CLUSTERS IN KNOWLEDGE INTENSIVE BUSINESS SERVICES: TAKING ICT SERVICES IN SHANGHAI AND BAVARIA AS AN EXAMPLE

Abstract

Due to the quick advancement of science and technology, the services sector which has a high content of knowledge and technology has experienced globally expeditious development in the past decade. Development in general and the growth of Knowledge Intensive Business Services (KIBS) such as Information and Communication Technology services (ICT services) in particular are at the core of the major trends that are restructuring the economic landscape of not only German but also Chinese economies.In Germany, in the new era of service economy, more emphases are put on KIBS instead of the traditional giant clusters of steel manufacturing and auto manufacturing. Especially in Bavaria, high technology clusters are prospering. The ICT services in Bavaria accounts for 40% of all software companies in Germany. A lot of ICT services clusters can be found, including IT Speicher, FIWM, BICC-NET, etc. Similar cases can be found in Shanghai, where a number of government driving as well as market pulling ICT services cluster are also coming into being.Previous empirical evidence shows an asymmetric bipolarity in the location behavior of KIBS. There is a general predominance of low concentration due to equal diffusion of these services in many regions, and a high concentration in some regions located at the top of the spatial hierarchy, particularly capital cities.The current exploratory research, drawing upon cluster theory and network theory, aims at discovering the cluster features both from the perspective of the company executives in the cluster. Using the data collected through interviews and questionnaire surveys from company managers, incorporated with current theoretical framework and, through integration and analysis, important features of the cluster such as network mechanism are calculated both in Bavaria and Shanghai. We check the supply side as well as the demand side of the reasons why clusters are formulated in the first place, and they both have a positive effect on the network mechanism of the cluster. The network mechanism has a positive effect on innovation performance of the ICT service companies. The reasons are also discussed. Suggestions are provided for policy making about the KIBS cluster forming for both regions and the cooperation in these fields, especially in terms of service outsourcing relationship. Valuable implications for deciding the location for a KIBS company on the firm level are also provided.