Research On The Development Of Knowledge-Intensive Services

A more knowledge-based and service-oriented industrial structure evolution process cannot be considered as a recession or stagnation of manufacturing; on the contrary, the growth of the service industry especially Knowledge-Intensive Services (KIS) is clearly related to changes in manufacturing companies. The emergence of KIS is not only connected to the impact of new information and communication technologies and the consequence of specialized production processes, but also to the aggregate causes associated with the deep transformations in industrial structure, which is required by the development of productive forces. KIS play a key role during the production process which reflects a dynamic relationship of interdependency, interaction and mutual development with the manufacturing industry. The growth of KIS represents a qualitatively new stage in the social structure of production. Used as intermediate inputs, KIS can put more professional human capital and knowledge resources into the production process, which can bring an increasingly complex social division of labour and enhance the efficiency of production and operation. As actors of original innovation and knowledge diffusion, KIS can also improve the manufacturing firm’s innovation ability and productivity through a knowledge spillover effect, which plays a major role in the expansion of the service economy-a process of economic transformation from manufacturing to services that significantly changes the nature of work, production, the structure and operation of economies-whether in developed countries or in developing countries.The Chinese economy has progressed through several transitions since carrying out relevant economic reforms and implementing the opening up policy. After the worldwide financial crisis started from the US in2008, it is a "Golden Age" for the nation to upgrade the industrial structure and shift its economic development mode. In this context China’s service industry especially KIS will be the nation’s most significant force for promoting a successful transition toward a more balanced economy and industrial structure based on high technology, new energy, environmental sustainability, value-added manufacturing, and enhanced human resources.Thus, exploring the broad question of how KIS have been growing and how this is related to China’s economic development will be an interesting case to illustrate the relationship between service development and manufacturing and economic restructuring in a transitional economy, providing a new testing ground for theoretical reconstruction and advancement.According to the literature review on KIS, we find that research on KIS both published in English and in Chinese, has attempted mainly to analyze the relationship between KIS and service innovation from the perspective of management. While these studies have made significant recent progress, they leave many questions unanswered. A key focus of this research is to reveal the mechanism of formation and development of KIS from the perspective of economics. More generally, under the background of the rise of knowledge economy and service economy, this paper focuses on the definition and characteristics of KIS, the evolution mechanism of KIS, the role of KIS in knowledge generation and circulation, and its effects on productivity as intermediate inputs. The main content of the thesis is that:The thesis introduces KIS firstly:what they are, where they come from, what Knowledge-Intensive Services Activities (KISA) is, how KIS are defined and classified. According to a definition from the industry perspective, this part presents the characteristic of KIS from five different aspects:input, production, demand, distribution and environment. The definition and classification of KIS aims to identify a clear subject to be studied in this thesis.Secondly, the evolution mechanism of KIS is explored. The industrial structure transformation from manufacturings to service sectors, from labor-intensive service sectors to knowledge-intensive service sectors and the social transition from an industrial society to a post-industrial society occured in developed countries after the1970s. Within this context, we focus on the main explanatory factors of KIS from three perspectives:progress of the science of technology, specification of labour division and upgrading of the industrial structure. In addition, the growing demands of industrial innovation are also the key driving force behind the development of KIS. Specifically, KIS represent an integration, concentration and internationalization trend. We also argue that government policy including guidance policy, human resources policy, tax policy, opening-up policy and intellectual property protection (IPR) policy will have a significant impact on KIS development.Thirdly, the thesis goes into depth on the influence of KIS on original innovation, knowledge diffusion and knowledge spillover effect. Act as external knowledge sources and constitute an interface between a client firm’s local tacit knowledge and various types of generic knowledge available in regional or national innovation systems. In so doing, KIS increase the connectivity and the receptivity of client firms to external sources of information and knowledge. In fact, KIS firms act more as bridges and converters between technological and business expertise and localized knowledge and capabilities and play a central role in knowledge generating, processing and diffusion function in regional and national innovation systems. When KIS overtake the material inputs as the key intermediate inputs, due to the crucial contribution of KIS to knowledge generation and diffusion within the economy, they can enhance their client’s especially manufacturing firm’s productivity and competitiveness through the knowledge spillover effect.Finally, a theoretical and an empirical analysis on how KIS enhance national productivity through their interaction with all other economic sectors are provided. According to Baumol’s model of unbalanced growth, if resources shift towards industries where productivity is growing relatively slowly, the aggregate productivity growth rate will slow down; however, Baumol’s conclusion only follows logically if the stagnant industries produce final products. If instead they produce intermediate products, the aggregate productivity growth rate may rise rather than fall. We revisit the Baumol’s model, and then construct a two industry model where KIS act as an intermediate input sector to manufacturing industries in order to evaluate its impact on the whole economy’s productivity. Based on this theoretical analysis, we further use the input-output analysis to identify the effect of development of KIS to China’s national productivity and other sector’s productivity. The study shows that KIS in general have a positive effect on China’s whole economy’s output and productivity. However, the impact of KIS on manufacturing sector’s output and productivity is not significant which means lower estimated spillovers from KIS. In contrast, the service sectors in China enjoy the highest spillover effect from KIS service innovation. This chapter analyzes the obstacles hampering KIS to enhance the productivity of manufacturing sectors in China from three different aspects:supply aspect, demand aspect and regulation aspect. The chapter concludes with some constructive suggestions on how to facilitate the development of KIS in China.The outcomes from this research establish a good foundation for deepening the theoretical research of KIS from the perspective of economics. The analysis of the formation and development of KIS, the innovation and knowledge diffusion function of KIS, the knowledge spillover effect of KIS and the contribution of KIS to productivity provides valuable insights into the propective development of KIS in China and offers theoretical references for the upgrading of industrial structure and the transformation of the mode of economic development in China which conform to the demands of a low-carbon economy.