The Impact of Contractual Arrangements on Innovation in Knowledge-Intensive Business Services

Abstract

Knowledge-intensive business services (KIBS) have become a very important source of new knowledge in the economy. For example, according to recent British estimates, 25 per cent of intermediate inputs in the UK economy derive from knowledge services (Tomlinson 2000a). However, we know relatively little about how knowledge is actually transferred through service processes. In particular, in many KIBS industries, the knowledge to be transferred is partly tacit and collective, which makes it especially difficult to share. On the other hand, knowledge being an immaterial asset, it can also be difficult to control and prevent from being circulated. This chapter explores the role of contractual arrangements in structuring knowledge creation and transfer activities. Understanding the incentives and processes of knowledge creation and transfer is critical in the assessment of knowledge-intensive services in economic growth.