Download The Penetration and Fusion Between KIBS and Modern Manufacturing

The Penetration and Fusion Between KIBS and Modern
Manufacturing
WANG Bingcai, LI Hui
School of Economics, Tianjin University of Commerce, Tianjin, China, 300134
[email protected]
Abstract: This paper first introduces the importance of liner innovation and network innovation in
knowledge-intensive service(KIBS) and manufacturing industry, then compares different kinds of
innovation of these two industries, finally puts forward that there are both differences and convergence
between manufacturing and service innovation system as well as the innovation laws. A tendency of
penetration and fusion appears between these two industries.
Keywords: KIBS, manufacturing, penetration and fusion
Although there are still differences between knowledge-intensive service (KIBS) and the modern
manufacturing, a tendency of penetration and fusion appeared because of the importance of service,
especially of the permeation and leading role of KIBS. Penetration and fusion demand us to focus on the
servitization of manufacturing and the industrialization of services as well as the integration among
innovation system of different departments.
1. Liner Innovation and Network Innovation
The innovation of manufacturing embodies a greater promotion of science and science-based or
science-concerned technology, while service innovation unfolds along the diversification track for the
heterogeneity of service. There is a linear model in the innovation of Manufacturing and service (as
shown in figure 1), however, it is more obvious in the innovation of manufacturing. (Of course, linear
model is no longer the mainstream of the innovation practice). Figure 1 is the linear innovation mode of
Schumpeter, this process highlights the promotion of the innovation of science (basic research) and
technology (applied research).
Figure 1. The liner innovation mode
Economic
growth
Expanding sales
Products
promotion
Developing test
Applied research
Basic research
Since 1970s and l980s, although network innovation is more widely (as shown in figure2, the arrows
represent the business relationship or knowledge flow direction, the coincidence of organization
boundary or research fields shows the difference of its business from the early Schumpeter modes), the
fundamental and promotional effect of science as basic research and technology as applied research is
still obvious.
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Figure 2. The network innovation
R&D institution of
enterprises
Basic research
KIBS 1
User1
Applied
research
KIBS 2
Universities
User2
In today's manufacturing field, even to imitate advanced technology, certain independent research and
developing capability are still required to make it been effectively used. This also works when absorbing
research achievement. This kind of view leads to the support to basic research activities of big
manufacturing companies, advances the KIBS in manufacturing. In a report on scientific and invention
about the chemical industry, Walsh said that the growth mode of companies’ patent activity and
scientific papers’ publishing are quite similar. Liebermann’s study showed that in the electronic industry,
scientists quoted more recent literature from basic physics journals than their peers in university. From
the absolute sense, the influence of the revolution of science and technology is far-reaching it can
permeate every field of economy and every corner of social life (including service). But due to the
stronger heterogeneity of service and its passive performance in the history (lags behind the agriculture
and manufacturing in the early stage), the service innovation is carried out along the diversification
track.
From the aspect of technology track, for instance, with the development of information and
communication technology, new service products like Internet communications services, online banking,
remote consultation, video ordering have arisen. And in the bank, application procedures which
increasing service efficiency, introducing new products or improving the existing services have been
successfully developed by insiders. From the aspect of organization track, with a sharp increase of some
knowledge-intensive enterprises, outsourcing has replaced the R&D activities of the corresponding
department internal the enterprise, which causes organization innovation of the enterprise. From the
professional services track, as human activities are extending to the virtual world, legal interpretation
and lawyers service also extends to the corresponding digital space. A convincing example for the
extension of this kind of professional services is that the service innovation can completely occur in the
context without any technological progress. As for the actual performance of the industrial innovation
and service innovation, science and technology plays a greater role in its promotion. While in service
innovation, it is conducted along the multi-track though it cannot be separated from the progress of
science and technology. But since the 1980s and 1990s, more network innovation modes are emerging.
It is manifested not only in manufacturing field, but also in the service sector; not only shown as the
regional innovation network in reality, but also permeated industry development. Anyway, the
importance of network interactive and knowledge to the innovation embodies both in manufacturing and
service or KIBS, though differ in degree. Network innovation has become an important realization form
of manufacturing and service innovation.
，
2. The Boundary Between Product and Service
The boundary between products and services is becoming more blurred. As shown in figure3, there is an
asymptotic transition between products and services, from pure products, core products to core services
and pure services----a simple example of the transition between products and services.
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Figure 3. Transition between products and services
Pure products
Food
Chemicals
Books
Core products
Electrical devices
Data storage system
Conveyance
Core services
Aviation
Hotel
ISP
Products
Pure services
Teaching
Financial advice
Medical advisor
Services
Data sources: Gustafsson and Johnson(2003,p7)
Among them, core products contain more proportion of service than pure products, and the core services
include less service proportion than pure service. The formation of the continuous between products and
services include the deepening of division and rising of service role etc. The fact that the blurred
boundary between products and services reveals that we should expand service by tangible product, and
produce and sell good products by strengthening service.
3. Market-oriented, Customer Innovation and Manufacturers Promotion
In service industry, innovative market and customer oriented features are more obvious. And in the
manufacturing industry innovation, though mass production in Ford type factory aims to meet new
requirements of consumers, the innovation is not benefited from interactive with customers but from
those observant entrepreneurs who dared to take the risk of the market in Schumpeter sense. In the
Toyota production system, the interactive of knowledge among flexible employees, R&D personnel or
other technical personnel and enterprise managers aim to satisfy consumers' diverse demands at low cost.
Compared with the Ford mode, production is more market-orientated.
Customer innovation refers to a process in which customers participate in innovation actively, or
sometimes lead the innovation due to the potential high rent of using the innovative achievements in
advance. According to the investigation of Greek poole (2005, p3) about the theory of innovative energy,
the main energy of innovation contains manufacturers, suppliers and users, and users are the main
source of innovation. The research of Lufeng and Feng KaiDong (2005) shows that due to its core role
in the network formed by accessories businessmen, when the Geely company enters into automobile
industry, its suppliers accomplished many technical improvement aims to reduce the cost. This belongs
to the supplier innovation. The most traditional Schumpeter type of innovation is manufacturer
innovation. Manufacturers begin to innovate after they have mastered the users’ demand and provide the
implementation of innovation to its customers. As to the manufacturing and services, they are all
existing customer innovation. Service is an industry based on the market competition. The interaction
process between enterprise staff and customers has been general, thus it is not fresh for customers to
lead, promote or stimulate innovation of the service enterprise. As for banking and other industries, as
users of information technology, they have a better understanding of their business processes and
customers’ requirements, etc, thus sometimes develop or improve their application software system.
Manufacturers promotion is a concept similar with scientific promotion, supply driving etc. Here,
manufacturer of course is a relative concept with individual customers. Manufacturers innovation,
customers innovation and supplier innovation all belongs to the innovation of manufacturers promotion.
As for the innovation of manufacturing and service industry, it has a higher rate of innovation in
manufacturing firms, while in the service industry, because of the more frequent interaction with
customers and the lower adoption of technology orbit, there is less innovation of manufacturer
promotion.
4. Convergence and Diversity of Innovation Rule
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Innovation is essentially a typical heterogeneity activity, so to talk about its laws is not suitable. But
from a large aspect, its consistency can be found from numerous cases of innovation, this is the laws of
innovation. For example, comfortable environment, flat organization, tolerant to error all contributes to
innovation. The convergence between KIBS and modern manufacturing in innovation rule registers as
the following: scientific-based innovation and opening of business all exist in different degrees; Liner
innovation mode does not occupy the mainstream; network innovation becomes an important means to
realize the innovation; Manufacturing and service innovation both may be customer or market
-orientated, but there are facts that consumers were supplied with products or services which they don't
or don’t quite understand, such as automobile anti-lock brake system in products, Internet or the world
wide web in service; In the innovation of technology or other things, organization innovation is always
very important; The process of innovation is full of interaction, repetition and uncertainty, it is a process
of evolution, which are essentially the same in two industries or behaviors; Though there is uncertainty
in Innovation, it is not arbitrarily and spontaneous at all, thus innovation system is necessary and
required. Independent innovation policy is indispensable, but the policy should be specific, personalized
and qualitative, while not quantitative in Keynes's way, which has no essential difference in the
manufacturing and service innovation; Because of the importance of knowledge interaction and
organization as the storage media of knowledge, entrepreneurs have a more important role in the
innovation of service and manufacturing; They all have the strategic vision about innovation, innovation
all register as the flow, creativity, repeat and spread of knowledge, knowledge is the source of economic
change, even though sometimes knowledge is attached to the physical elements; The two industry all
have its innovation system, but the two kinds of innovation system has different characteristics.
The diversity of the law in innovation have two aspects: one is that some factors have obvious
differences in these two kinds of innovation, for example, technological orbit is the main performance of
manufacturing innovation, rather than the main rail of service innovation; the other one is that many
innovative factors have differences in degrees in the two kinds of innovation. For example, the
technology or knowledge has a higher level of social decision in service industry, etc.
5. The Importance of Organization Innovation
The organization innovation is important for two reasons. One is that only when the organization is
transformed, it can adapt to the production technology, delivery way and product type, which have
changed or will change; the other one is that the innovation is a social process, thus innovation will
cause or followed by or only performs as a change of organization. Therefore, the organization
innovation is not only necessary, but inevitable. It is the same in two industries, but may vary in the
extent: the manufacturing innovation is more technical, while service innovation shows diversity, so the
former one is more of hard innovation, while the latter one is more of soft innovation. In other words,
the service innovation is more of the changes in organizational ways.
6. Differences and Convergence of Innovation System
Manufacturing innovation system is an institutionalized and closely connected system in which the
connections form a series of relations that can help the diffusion of knowledge and innovation. The
participants of the system interact with each other, and develop through the interaction innovation
system. A snowball effect may exist in the institutional system, which means some creativity may lead
to more creativity. Economic activity can follow the diffusion process, for this kind of diffusion is
following the particular innovational mode or type. Manufacturing innovation system has a relatively
stable and single innovative orbit, such as the technological orbit, thus it often forms lasting
relationships, norms and regulations.
Service innovation system has a looser connection because it contains more innovation tracks,
participants and temporary relationships between innovative enterprises and the participants. In the
service innovation system, the participants, rails and behaviors have an unfixed relationship. Innovative
enterprises and the external participants have less cooperation but still have linkage, because the latter
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are the supplier of input and buyer of output of the former. Innovation strategy leads to a social behavior.
Human beings are the participants. Therefore, like other human groups, the innovation process and
interactive system following the law of social ecology. Loosely connected innovation system issue from
rigid market competition and weak jointly promotion, the former one may from employment shortage in
manufacturing industry or the attractive social status of some service department; the latter one regards
science and technology as the basis of production or orbit of innovation.
There are both differences and convergence between manufacturing and service innovation system. The
convergence includes: they both have science-based innovation and departments; the importance of the
network innovation rises greatly; organizational innovation is the guarantee of technology innovation,
and so on.
7. Social Decision of Knowledge
Through the comparison of the manufacturing and service innovation and the discussion of innovational
network and system in manufacturing and service industry, we will find the importance of contact and
interaction among the main part of economic activities, and the flow of knowledge. Then we will put
forward an important conclusion: knowledge has its own internal law of development, but it is also
decided by the society. This fact and opinion tells us, the achievement of the goal of social development
depends on the systematic construction of the society. Relaxed and free living environment of society,
harmonious social relations, smooth communication channel and mechanism of knowledge, generous
public knowledge infrastructure, competitive market system and atmosphere, low rent space and high
incentive effects of innovation policy all contributes to the increase of knowledge and the realization of
innovation-oriented country and society. Knowledge is decided by the society also means that the social
knowledge of human rules is the result of human social activities, rather than the product of elites’
design. Associated with innovative policy, the theory of social decision of the knowledge indicates that
government should create more factors to promote innovation, while not participating in the process of
economic innovation directly.
References
[1]. Liebermann, M.G. (1978), A literature citation study of science technology coupling in electronics,
Proceedings of the IEEE, vol. 66, no. 1, pp.4-13
[2]. Anders Gustafsson and Michael D. Johnson, Competing in a Service Economy, Jossey-Bass 2003
[3]. Lu Feng, Feng Kaidong, The policy choice of China’s automobile industry development with
independent intellectual property rights, Peking University Press,2005,1
[4]. Xiao Feng, On the social formation of technology, Social Sciences in China, 2002,6
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