Research and research organization

Abstract

Section 2.3 in the preceding chapter has shown that services are fairly similar to manufacturing industries in terms of the proportion of innovating firms. Differences arise, however, if innovation intensity or the formation of RJVs are considered instead. It seems likely that knowledge spillovers that arise in a firm’s innovation process might help to explain these differences in innovation intensity between manufacturing and services. Knowledge generated in the innovation process of a service sector firm is often bound to tacit knowledge only since codification of service sector innovation is unfeasible in many cases (Amable and Palombarini 1998), a finding that is reflected by the service sector’s comparatively low propensity to patent innovations. Tacit knowledge is, however, the main source of knowledge spillovers since tacit knowledge is a “capacity that is embodied in the brain” of workers (Nightingale 1998, p. 689) and hence more easily absorbed by competing firms than knowledge that is codified in patents or retrieved by ‘inventing around’. Spillovers therefore might play an even more important role in a service sector firm’s decision to invest in research or to form a research joint venture than in a manufacturing firm’s decision. Empirical evidence on the effects of spillovers on research investment and on the organization of research by service sector firms is still scarce, so this chapter aims at providing empirical evidence on the determinants of research expenditures and RJV formation for the German service sector within a game-theoretical framework for research efforts and joint venture formation.