The internal differentiation of the KIBS sector: empirical evidence from cluster analysis

The sector of Knowledge-Intensive Business Services (KIBS) is characterised by high rates of firm fluctuation, rapid changes in technological progress (e.g., in the software industry) as well as high interdependencies between subsectors (e.g., consultancy and engineering). These features give rise to fuzzy internal and external sectoral boundaries and make it difficult to apply common, basically output-oriented industry classifications. Although conventional taxonomies, such as the NACE or the ISIC, are indispensable in many respects (e.g., for comparative studies), it is worth considering classifications falling back on alternative criteria. In the present paper, we perform a cluster analysis on a sample of 547 German KIBS firms. The study takes into account fundamental characteristics of these firms, e.g., interaction patterns and innovation behaviour. The resulting classification (seven distinct groups) reveals that the examined service firms can also be differentiated by using firm-internal attributes rather than the services provided. Finally, the new taxonomy is tested with several regression models showing that our classification is a viable alternative to conventional industry classifications.