Capturing Value from Innovation in Knowledge-Intensive Business Service Firms: The Role of Competitive Strategy

Abstract

Building on a problem-solving perspective to value creation and capture, and on the business strategy literature, we argue that the actions that knowledge-intensive business service (KIBS) firms take to identify, select and solve client problems will affect their approach to capturing value from innovation. We apply regression analysis to data from an original survey involving a sample of 230 innovations introduced by 150 publicly traded UK and US KIBS firms. Distinguishing between cost- and differentiation-oriented KIBS firms, we find that cost-oriented firms tend to place more importance on all appropriability mechanisms than do differentiation-oriented firms. Furthermore, the perceived importance of formal appropriability mechanisms, relative to that of all appropriability mechanisms, tends to be higher for cost-oriented than for differentiation-oriented firms. This association is stronger for the case of the introduction of process (rather than product) innovation. These findings contribute to the strategy and service innovation literatures, by showing that KIBS firms’ competitive strategies influence value capture, over and above the role of the innovation-, industry- and institutional-level factors examined in earlier studies.