Priority Sector Report

Knowledge Intensive Business ServicesMarch 2009

Executive summary

• Knowledge-Intensive Business Services (KIBS) is a sector based on parts of four European Cluster Observatory

cluster categories: Education and Knowledge Creation, Business Services, Financial Services and IT. KIBS includes

25 industries in total.

• Regions with strong KIBS sectors exhibit the highest prosperity levels in Europe.

• The presence of a strong KIBS sector positively affects regional innovation performance (patenting).

• KIBS sectors are predominantly urban activities; however, some metropolitan cities in Europe perform better than

others.

• Among the regions of Europe the following ten regions have a KIBS sector larger than expected: Zürich, Stockholm,

Oxford, Inner London, Brighton, Frankfurt am Main, Berlin, München, Stuttgart and Athens.

• Among the 25 largest regions in Europe the following have a KIBS sector smaller than expected: Katowice, Palermo,

Bari, Naples, Marseille, Valencia, Antwerpen, Sevilla and Venice.

• As a share of regional labour market employment, KIBS accounts for the largest shares in Brussels (16.0%), Inner

London (15.2%) and Zürich (14.6%).

• Most growing KIBS regions are small. However, Ireland is a region with a large KIBS sector which is also growing

rapidly.

• The largest growth in KIBS employment is found in Austria (Graz, Bregenz, Salzburg, Innsbruck), Estonia, Lithuania

and Northern Spain/Southern France.

• Some leading innovation regions in Europe, such as Stockholm, Praha and Frankfurt am Main, are experiencing

shrinking KIBS employment.

Europe INNOVA is an initiative for innovation professionals supported by the European Commission under the sixth framework programme.

The fundamental objectives of this initiative fall in line with the policy direction set out within the FP6 priority of 'Structuring the European

Research Area'. In acting as the focal point for innovation networking in Europe, Europe INNOVA aspires to inform, assist, mobilise and

network the key stakeholders in the field of entrepreneurial innovation, including company managers, policy makers, cluster managers,

investors and relevant associations. Additional information on Europe INNOVA is available on the Internet (www.europe-innova.org).

Legal notice

This report has been produced as part of the Europe INNOVA initiative. The views expressed in this report, as well as the information

included in it, do not necessarily reflect the opinion or position of the European Commission and in no way commits the institution.

1 Priority Sector report: Knowledge Intensive Business Services

KIBS, innova-tion and pros-perity

Knowledge intensive business services often

accompany regional prosperity and innovation. The

graphs on this page show the relationship between GDP

per capita, Patent applications and Location Quotient*

representing the relative strength of the KIBS sector in the region†. The size of a bubble in the charts represents the

size of the population of the region.

The strength of the relationship between the concentration

of KIBS in a region‡ and the region’s economic prosperity

is striking. It is evident that wealthy regions typically

support disproportionally high concentrations of KIBS

employment. In fact, with no other factors taken into

account, regional KIBS specialisation explains 59% of

variance in GDP per capita.

The pattern is similar, although less pronounced, when we

look at innovation indicators. The trend is clear: regions

with high concentrations of knowledge intensive business

services exhibit superior patenting activity, and the

opposite is true for regions with little KIBS. In the middle,

however, there are regions with both extremely high as well

as very low patenting. This suggests that there are many

other factors influencing innovation, but the presence of

KIBS makes a difference.

Priority Sector report: Knowledge Intensive Business Services 2

* Location Quotient (LQ) measures teh regional specialisation in the KIBS sector.

† GDP, patenting and population data from Eurostat.

‡ Regions correspond to NUTS II regions across the 27 EU member states plus Iceland, Norway, Switzerland and Turkey. In Belgium, Greece, Ireland, Netherlands and Turkey, NUTS I regions were used due to comparatively small areas and/or size of employment.

0.5 1.0 1.5 2.0 2.5

10000

20000

30000

40000

50000

60000

Knowledge Intensive Business Services

Location Quotient

GD

P p

er

cap

ita P

PP

R2= 0.59

0.5 1.0 1.5 2.0 2.5

-6-5

-4-3

-2-1

Knowledge Intensive Business Services

Location Quotient

Lo

g o

f P

ate

nt

ap

plicati

on

s t

o E

PO

per

millio

n in

hab

itan

ts

R2= 0.324

Size and Focus

Regional size and KIBS rankKnowledge intensive business services are in general a

predominantly urban activity. This argument is confirmed

upon examination of the regions which rank among the top

25 by either population or KIBS employment.

Region Largest citySize rank

KIBS rank

Île de France (FR) Paris 1 1

Lombardia (IT) Milan 2 4

Andalucía (ES) Sevilla 3 24

West-Nederland (NL) Amsterdam 4 3

Cataluña (ES) Barcelona 5 7

Vlaams Gewest (BE) Antwerpen 6 27

Rhône-Alpes (FR) Lyon 7 16

Campania (IT) Naples 8 47

Madrid (ES) Madrid 9 5

Danmark (DK) Danmark 10 10

Düsseldorf (DE) Düsseldorf 11 12

Lazio (IT) Rome 12 9

Mazowieckie (PL) Warszawa 13 19

Sicilia (IT) Palermo 14 60

Provence-Alpes-

Côte d'Azur (FR)Marseille 15 43

Slaskie (PL) Katowice 16 69

Veneto (IT) Venice 17 29

Outer London (UK) Outer London 18 18

Valencia (ES) Valencia 19 45

Köln (DE) Köln 20 13

Piemonte (IT) Turin 21 26

Oberbayern (DE) München 22 8

Emilia-Romagna (IT) Bologna 23 22

Ireland (IE) Ireland 24 14

Region Largest citySize rank

KIBS rank

Puglia (IT) Bari 25 65

Stuttgart (DE) Stuttgart 27 15

Attiki (GR) Athens 28 17

Darmstadt (DE)Frankfurt am

Main30 6

Berlin (DE) Berlin 39 23

Inner London (UK) Inner London 46 2

Surrey, E and W

Sussex (UK)Brighton 59 21

Berks, Bucks and

Oxon (UK)Oxford 82 11

Stockholm (SE) Stockholm 98 25

Zürich (CH) Zürich 160 20

However, the relationship of the size of the region and

employment in KIBS is not always direct: some regions

have a KIBS sector much larger than expected, while

others score lower.

The following ten regions have a KIBS sector larger than

expected: Zürich, Stockholm, Oxford, Inner London,

Brighton, Frankfurt am Main, Berlin, München, Stuttgart

and Athens.

Among the 25 largest regions in Europe the following have

a KIBS sector smaller than expected: Katowice, Palermo,

Bari, Naples, Marseille, Valencia, Antwerpen, Sevilla and

Venice.

Labour market focusThe map to the right exhibits the share of a region’s labour

force employed in KIBS (“KIBS focus”).

The largest share of KIBS employment is typically

concentrated in the capital regions of the respective

countries. The most notable exceptions from this rule

include Germany, where regions in the South and West

focus on KIBS even more than Berlin; and the UK, where

the whole belt of regions around London as well as

Manchester/Liverpool and Edinburgh exhibit high relative

KIBS employment.

3 Priority Sector report: Knowledge Intensive Business Services

Focus

2006

less than 4%

from 4% to 6%

from 6% to 8%

more than 8%

Source: European Cluster Observatory 20090 500 1000 km

KIBS

Region KIBS Employment KIBS Focus

Brussels, BE 122,731 16.0%

Inner London, UK 472,940 15.2%

Zürich, CH 138,797 14.6%

Darmstadt (Frankfurt am Main), DE 231,492 13.4%

Île de France (Paris), FR 788,496 13.3%

Berks, Bucks and Oxon (Oxford), UK 174,599 12.7%

Luxembourg, LU 27,961 12.2%

Hamburg, DE 108,454 11.8%

Berlin, DE 134,930 10.9%

Bratislavsky kraj (Bratislava), SK 39,362 10.9%

Priority Sector report: Knowledge Intensive Business Services 4

Growth

Based on the longitudinal data available§, the average

annual growth rate of KIBS employment between 2001

and 2006 was 1.7% compared to 1.2% increase in total

employment in Europe.

The regions exhibiting the largest growth include much of

Austria, the Baltic states, Northern Spain/Southern France

and Ireland, as seen from the map and table on the

opposite page.

However, the fastest growing regions are mostly small

ones with little KIBS employment. The only region which is

both highly focused on KIBS (more than 8% employment)

and fast-growing (more than 5% annual growth rate) is

Ireland, which during the first years of the century enjoyed

a boom in software and business services.

Regional Innovation (RIS)Interestingly enough, the regions normally considered

European champions in innovation (here represented by

2006 EU Regional Innovation Survey indicators **) show

varying degrees of growth in KIBS. Stockholm, Praha and

Frankfurt am Main are the fastest decreasing KIBS regions

among the top 20 most innovating regions in Europe.

Region RISAnnual Growth

Stockholm, SE 0.90 -1.52%

Västsverige (Gothenburg), SE 0.83 0.77%

Oberbayern (München), DE 0.79 0.47%

Etelä-Suomi (Helsinki), FI 0.78 -0.22%

Karlsruhe, DE 0.78 1.15%

Stuttgart, DE 0.77 1.17%

Braunschweig, DE 0.76 -0.40%

Sydsverige (Malmö), SE 0.76 -0.20%

Île de France (Paris), FR 0.75 0.80%

Östra Mellansverige (Uppsala), SE 0.74 -0.74%

Berlin, DE 0.74 0.79%

Tübingen, DE 0.72 0.78%

Praha, CZ 0.70 -0.89%

Darmstadt (Frankfurt am Main), DE 0.69 -0.52%

Dresden, DE 0.69 1.16%

Köln, DE 0.69 0.02%

Danmark, DK 0.68 0.62%

Pohjois-Suomi (Oulu), FI 0.68 0.63%

Mittelfranken (Nürnberg), DE 0.68 1.10%

Wien, AT 0.68 4.93%

5 Priority Sector report: Knowledge Intensive Business Services

§ The data is missing for Bulgaria, Cyprus, Greece, Italy, Netherlands, Portugal and Romania.

** UK regions are not shown as RIS was conducted for NUTS I regions.

Annual Growth

2001-2006

less than -1%

from -1% to +1%

from +1% to +5%

more than +5%

no data

Source: European Cluster Observatory 20090 500 1000 km

KIBS

RegionAverage annual growth rate

2001 ­ 2006

Steiermark (Graz), AT 22.4%

Eesti, EE 19.7%

Lietuva, LT 15.5%

Vorarlberg (Bregenz), AT 13.3%

Salzburg, AT 13.2%

Tirol (Innsbruck), AT 10.8%

Cornwall and Isles of Scilly (Truro), UK 8.9%

Zapadne Slovensko (Nitra), SK 8.4%

Galicia (A Coruña), ES 7.5%

Del-Dunantul (Pécs), HU 7.3%

Priority Sector report: Knowledge Intensive Business Services 6

About the European Cluster Observatory

The European Cluster Observatory, launched in June 2007, is the most comprehensive database on clusters, cluster

organisations, and cluster reports in Europe. It is managed by the Center for Strategy and Competitiveness (CSC) at the

Stockholm School of Economics and funded by the European Commission's Directorate General for Enterprise and Industry.

The European Cluster Observatory website provides a wide variety of data on clusters in Europe, and is divided into four

main sections:

• Cluster Mapping provides information on 38 cluster categories in 259 NUTS II regions;

• Cluster Organisations offers maps and lists of regional or local private-public partnerships focused on cluster

improvements;

• Cluster Policies collects reports on national and regional cluster policies and programmes;

• Cluster Library archives special Observatory reports, cluster case studies and other cluster-related documents.

In 2009, the Observatory will enter the second phase of development bringing new features and introducing a collaboration

platform for cluster organisations and SMEs.

Please visit the European Cluster Observatory at www.clusterobservatory.eu.

Priority Sector report: Knowledge Intensive Business ServicesPriority Sector report: Knowledge Intensive Business Services

ISBN 978-91-977556-1-0ISBN 978-91-977556-1-0

This report is published by:This report is published by:

Center for Strategy and CompetitivenessCenter for Strategy and Competitiveness

Stockholm School of EconomicsStockholm School of Economics

Box 6501SE-113 83 StockholmSweden

Website: www.hhs.se/cscTelephone: +46-(0)8-736 9630 Fax: +46-(0)8-31 99 27