Knowledge-intensive

Introduction

Services constitute a challenge to economic theory, both conceptually and methodologically. It is not always easy, indeed, to define the outputs of service activities. They are often indissociable from the process by which they are produced and have to be considered within different time frames: that in which the service itself is produced and that in which the effect of the service makes itself felt. As a result, it is difficult to define innovation, evaluate performance and analyse markets i .

In knowledge-intensive business services (KIBS), that is research, consultancy and engineering business services, these difficulties are compounded by those associated with another problematic area of economic theory, namely that of knowledge.

Starting from the hypothesis that what ultimately concerns the client firm is the (direct or indirect

iii ) acquisition of meaning in the hope of shedding light on changing internal and external environments iv , we can say that it is knowledge (the category with the greatest semantic content) that lies at the heart of the activities of KIBS providers.

The service provider's competence can be defined as an aptitude for processing that knowledge in different ways. The various forms this competence takes, with which this paper is chiefly concerned and which are examined in Section 2, are closely linked to the particular characteristics of knowledge as a commodity. These characteristics can be considered from three different points of view: the object of the knowledge, its nature and its economic properties.

The object of knowledge

The object of knowledge may be an understanding of the physical and natural world or of the economic and social world. Thus this first point of view denotes the distinction between 1) scientific and technical knowledge (in the strict sense of the term), which describes the laws governing the functioning of the physical and natural world and which is the product of research, and 2) economic and social knowledge which, from the perspective of firms and organizations, relates to the states of the internal and external economic and social environments (including the technological environments). In reality, there is no reason why the first category (scientific and technical knowledge)

should not also include knowledge relating to the principles governing the economic and social world when they too are the result of research activity (in economics, law, sociology or psychology).

Paradoxically, and with few exceptions (notably [START_REF] Hayek | The use of knowledge in society[END_REF], economic theories of information and knowledge, whether in traditional economics [START_REF] Arrow | Economic Welfare and the allocation of resources for invention[END_REF] or in the new economics of science [START_REF] Dasgupta | Towards a new economics of science[END_REF], focus essentially on the first category (in its strict sense). Thus [START_REF] Machlup | Knowledge: its creation, distribution and economic significance[END_REF] himself identifies three types of knowledge: 1) technological knowledge, 2) useful non-technological knowledge and 3) and 'dispersed' knowledge, that is information on unique and ephemeral events in economic life. However, as [START_REF] Ribault | Formes et limites de la marchandisation de l'information[END_REF] notes, he concerns himself essentially only with the first category, namely with scientific and technical knowledge.

The provision of KIBS can encompass the whole range of functions that constitute a firm's activity. Consequently, a KIBS provider may be required to assume responsibility for the dynamic of different environments: economic, legal, social, scientific and technological, and so on. Thus in any analysis of the activity of KIBS firms, account has to be taken of all existing types of knowledge and not simply of scientific and technical knowledge.

The nature of knowledge

The question of the nature of knowledge can be examined at various levels. Firstly, it should be noted that, like the notion of service itself, the term knowledge denotes both a process and an outcome. The various forms of knowledge also differ in the extent of their sphere of application. Thus there are general and specific forms of knowledge.

Another distinction is made between declarative, procedural and causal knowledge in order to denote, respectively, the content, modalities and explanations of a given event [START_REF] Cohen | Organizational routines are stored as procedural memory: evidence from a laboratory study[END_REF]. These three categories constitute a subset of the typology developed by [START_REF] Lundvall | The learning Economy[END_REF], in which four forms of knowledge are identified: know-what, know-how, know-why and know-who.

However, the most widely used distinction is the one frequently associated with [START_REF] Polanyi | The tacit dimension[END_REF], which contrasts tacit knowledge (sometimes known as implicit or embodied knowledge) with codified knowledge. Tacit knowledge is subjective and difficult to articulate and codify, that is to express in the form of language or written symbols. For Polanyi, it reflects the fact that individuals know more than they are capable of expressing. In reality, the tacit nature of knowledge can be considered not only at the level of the individual but also at that of the group or organization. More generally, it can be said that knowledge can be embodied in various media: individuals, organizations (in the form of procedures or routines) or technical systems. Conversely, codified knowledge can readily be expressed in the form of signs and verbal or written symbols.

As we shall see, the importance of this distinction lies in the differences between the various regimes of appropriation and in the ease with which knowledge can be transferred. Codified knowledge is easy to transfer and difficult to appropriate. Tacit knowledge can be transferred, but the process is slower and considerably more costly and the regime of appropriation higher. As [START_REF] Winter | Knowledge and competence as strategic assets[END_REF] stresses, the ease with which knowledge can be transferred increases in line with other criteria: the opportunity to observe the knowledge in use, its simplicity and its relative autonomy (as opposed to its integration into a system). Moreover, the extent to which knowledge is codified may not be an accurate indicator of the ease with which it can be transferred. Indeed, the degree of codification may well be a reflection not of any intrinsic technical characteristic of the knowledge but rather of a transitory state that is likely to change in accordance with technical, intellectual or social conditions. Thus in order accurately to assess the ease of transfer, we have to focus on the following three continuums: tacitarticulable, teachable-not teachable and inarticulated-articulated, since even tacit knowledge can be more or less teachable (and therefore transferable) and articulable knowledge may or may not be articulated depending on the strategy or circumstances.

The economic properties of knowledge

In the traditional economic literature, there is a general belief, derived in particular from the works of [START_REF] Arrow | Economic Welfare and the allocation of resources for invention[END_REF], that knowledge (regarded as comparable to technological information) has two properties that distinguish it from traditional tangible goods but make it similar to public goods v .

1. Knowledge is a good whose exclusivity is difficult to maintain: it is a 'nonexcludable' good. Despite firms' efforts to contain it, knowledge has a propensity to escape into the external environment, there to disperse itself through a variety of channels to the benefit (at no extra cost) of other economic agents. Thus the processing and production of knowledge give rise to positive externalities (spillover) that are difficult to control.

2. Knowledge is a good that is not exhausted in use. Each individual can consume knowledge without reducing others' consumption of it, however numerous those others may be. In order to consume such knowledge, economic agents do not enter into rivalry or competition with each other. Thus it is a non-rival good. The marginal cost of its consumption by an (additional) consumer is close to zero.

Taken in conjunction with each other, these two characteristics of the use of knowledge (non-excludability and non-rivalry) have certain economic consequences:

-knowledge cannot be appropriated by its producer (or only at excessively high cost);

-it can be transferred easily and at low cost between individuals and across time and space;

-the sale of knowledge poses a difficult problem, since no such sale can take place without disclosure but disclosure renders the sale null and void.

This concept of knowledge is not without value for those seeking to understand knowledge-intensive business services. Some of the transactions involved do indeed relate to information that was either codified initially or became codified as a result of the service provider's intervention. However, this concept does not adequately describe the full diversity of forms taken by KIBS transactions.

The recently developed neo-Schumpeterian approach marks a break with this concept of knowledge as information and as a public good. It alters the economic characteristics of knowledge by attributing a significant role to tacit knowledge and to the nature of the relationships between tacit and codified knowledge and by emphasising the cumulative and specific nature of knowledge. Tacit (or embodied) knowledge is considered, on the one hand, as a rival good and, on the other hand, as an excludable good, that is one that is easily appropriated. In other words, such knowledge is a genuine private good. Whether tacit or codified, knowledge depends on context and introduces irreversibilities into learning processes. Thus knowledge can be stored, accumulated and capitalised, and the competitive advantage of external KIBS providers over internal specialists can be said to lie less in the reduction of transaction costs than in quantitative and qualitative differences and complementarities relating to knowledge, what [START_REF] Noteboom | Towards a dynamic theory of transactions[END_REF] calls external economies of cognitive scope.

Different basic mechanisms for producing and processing knowledge

Since the activity of KIBS providers can be said to consist of the production of knowledge from knowledge, their competences can be said to reside in their aptitude for processing and producing knowledge on behalf of a client. Thus any attempt to investigate the competences of KIBS providers must seek to clarify the content of the general terms processing and producing. Although they are not directly concerned with KIBS, the economics and organization science literatures contain some interesting studies of basic knowledge-processing mechanisms that might shed some light on our analysis of the competences of KIBS providers. However, the competences mobilised within a KIBS relationship cannot be considered independently of the mechanisms located within the 'black box' of knowledge-intensive business services (and particularly those related to the accumulation of knowledge).

The basic knowledge-processing mechanisms

Although the literature contains many studies of knowledge processing, there have been few attempts to focus in a precise and articulated way on the basic procedures by which knowledge is processed. We outline below two of the exceptions to this general rule [START_REF] Noteboom | Innovation, learning and industrial organisation[END_REF][START_REF] Nonaka | A dynamic theory of organizational knowledge creation[END_REF]; see also [START_REF] Nonaka | The knowledge-creating company[END_REF].

a) [START_REF] Noteboom | Innovation, learning and industrial organisation[END_REF] sets out to investigate the way in which firms attempt to reconcile continuity and change or, in other words, incremental and radical innovation or even uncertainty and risk. The problem here is one of abduction vi , in the sense of the term defined by [START_REF] Peirce | Essays in the philosophy of science[END_REF] as he sought to understand the mechanisms that facilitate the transition from one practice to another. Drawing his inspiration from the works of [START_REF] Piaget | Psychologie et épistémologie[END_REF] on individual cognition, [START_REF] Noteboom | Innovation, learning and industrial organisation[END_REF] describes five (heuristic)

principles of abduction which, taken in succession, constitute a learning cycle.

-Generalization. This first principle of abduction describes the application of a tried and tested practice to new but adjoining contexts. While it satisfies the demands of current production, this principle also reveals the limits of generalization and triggers the following principle.

-Differentiation. This denotes the adaptation to the local context of practices whose limits have been revealed by generalization. Differentiation represents an attempt to circumvent these limits. Once again, it allows current production to continue while at the same time introducing new adaptations in accordance with another principle of abduction, namely reciprocation.

-Reciprocation. This is the principle whereby, in any given context, different but parallel practices are compared with a view to exchanging the most effective elements in those practices. Thus metaphor and analogy are principles of reciprocation.

-Accommodation (or combination). Repeated implementation of the principles of differentiation and reciprocation may weaken the practice in question and impact adversely on its efficiency and effectiveness. The opportunities for standardisation and realising economies of scale gradually decline and the practice becomes more complex, losing its coherence as it is adapted and augmented. Once a certain stage has been reached, a more fundamental restructuring becomes necessary. This restructuring consists of establishing a new practice by combining elements derived from different practices. This principle of accommodation or combination leads to the creation of novelty in an indeterminate form.

-Consolidation. This principle involved the transformation of an indeterminate novelty into a 'dominant design', in the sense of the term used by [START_REF] Abernathy | Patterns of Industrial Innovation[END_REF]. Once this dominant design has been established, a new learning cycle (initiated by the generalization principle) can get under way.

The learning cycle outlined above gives rise to several comments.

-It applies not only to individuals but also to organizations, industries and even countries.

-It has to be considered as an heuristic procedure and not as a logical sequence. Some principles may be superimposed on each other, others may be absent, and so on.

-It links the principles of continuity, exploitation and equilibrium, or first-order learning (consolidation and generalization), with those of exploration and disequilibrium, or second-order learning (differentiation, reciprocation and accommodation).

b) The studies by [START_REF] Nonaka | A dynamic theory of organizational knowledge creation[END_REF] and [START_REF] Nonaka | The knowledge-creating company[END_REF] also offer a potentially very fruitful perspective on the modes of knowledge processing. Although they too are interested in the emergence of innovation, these authors put the emphasis not on the diversity of the principles of abduction but rather on the variety of 'social interactions between tacit and explicit knowledge'. These social interactions, which constitute different modes of knowledge conversion or transfer, fall into one of four categories.

-Socialization. This mode of conversion denotes social interactions in which tacit knowledge is exchanged. Socialization is based on and contributes to the construction of a knowledge base that is shared by the group or organization in question. It is closely linked to the notion of experience, in the sense that tacit knowledge is acquired through experience.

-Externalization. This denotes the conversion of tacit knowledge into codified knowledge. This form of knowledge processing, which goes hand in hand with a certain loss of meaning, may take the form of metaphors, analogies, concepts, hypotheses or models.

-Combination. This is a mode of knowledge conversion in which explicit knowledge is combined with more explicit knowledge and fed into the common base of explicit knowledge. The process of combination is facilitated by the use of various media:

written documents, communications networks, and so on.

-Internalization. This denotes the transformation of explicit knowledge into tacit knowledge. Internalization is often synonymous with learning by doing (imitation, experience).

These four modes of knowledge conversion (socialization, externalization, combination and internalization) are not independent of each other. Sequenced as above, they constitute a learning spiral.

The studies outlined here deal with the question of knowledge processing from two different but complementary angles. The first puts the emphasis primarily on the principles of abduction. A distinction is made between exploration and exploitation mechanisms (in the sense attributed to the terms by [START_REF] March | Exploration and exploitation in organizational learning[END_REF], depending on how far the mode of knowledge processing in question leads the individual or organization away from the initial cognitive state. The second stresses the epistemological dimension of knowledge, that is its tacit or explicit nature.

These studies express the view that the learning cycle or spiral can be considered at various levels of analysis (the individual, the group, the organization, and so on) or that analysis of it has to be conducted at several different levels. We are concerned here with one particular situation, namely service transactions involving a client and a KIBS provider. Our purpose, therefore, is to examine the modes of knowledge processing deployed in this particular situation.

The competences of KIBS providers

Drawing on the definition of services proposed by [START_REF] Gadrey | The caracterization of goods and services: an alternative approach[END_REF], we can say that the activity of KIBS providers consists of placing at the disposition of clients capabilities for processing information and knowledge. These capabilities are what we call the competences of KIBS providers. Our aim here is to highlight the various forms that these competences take. In so doing, we will draw on the studies examined above while at the same time seeking to remain close to the actual forms of knowledge processing deployed by KIBS providers.

A KIBS transaction can be said to bring three elements into play (Figure 1):

1. the source (S) of the input knowledge;

2. the receiver (R) of the output knowledge;

3. the processor (P) of the input knowledge and the (co) producer of the output knowledge.

Figure 1 The KIBS transaction as a form of knowledge processing

This representation is an extremely simplistic one. It covers a number of more complex configurations.

Thus the receiver of the knowledge (R) may denote the individual client, a group within the organization or the client organization as a whole. The service provider itself is also a receiver, to the extent that it seeks to store the knowledge that emerges from each new transaction in its organizational memory in order to use it later as input knowledge (cf. § 2.3).

The source of the knowledge (S) is also a heterogeneous category encompassing a) the client itself (that is the receiver in the various senses of the term), b) the client's external environment and c) the processor, considered as a database of knowledge accumulated in the course of repeated KIBS transactions. While it is possible that just one of these components may be brought into play in a KIBS transaction, it is more usual for them all to be mobilised.

The processor (P) is the service provider, which may also be regarded as an individual, a project group or an organization. The client itself is a knowledge processor, particularly when the service is co-produced and not simply subcontracted. Some of the components of a KIBS transaction (S, R, P) may merge with each other. In this case, they indicate the existence of reflexive relationships: for example, an individual or a group may be both the source and the receiver of knowledge. Usually, however, their very heterogeneity means that these various components bring different subunits into contact with each other. For example, it is commonly the case in large firms that the source of knowledge is different from the receiver. In particular, as [START_REF] Cohendet | Knowledge coordination, competence creation and integrated networks in globalised firms[END_REF] stress, the problem facing large international firms today is how to ensure that (localized) knowledge circulates internally between different sites.

The main activity of the service provider as a processor of knowledge is to transfer, as effectively and efficiently as possible, the knowledge crystallised in a solution from a source to a receiver. The term transfer denotes both a physical movement and the economic circulation of a good (with all the difficulties of transferring ownership inherent in this particular commodity). The forms taken by this transfer equate to the interventions of the KIBS provider in the various aspects of the knowledge in question (Table 1): its (physical) circulation, its form, its scope and its structure. However, the quality of the various basic transfer mechanisms also depends on certain characteristics of the source and the receiver.

a) The characteristics of the source and the receiver

The qualities of the receiver can be described, in very simple terms, as receptive qualities. They denote the cognitive aptitudes, the 'technical' conditions and the attitudes (behaviour patterns, strategies) that encourage the acquisition of knowledge.

They reflect the additive and complementary nature of knowledge. The quality of a KIBS provider's intervention depends on the receptive qualities of the receiver. These qualities permit or facilitate communication and reduce informational asymmetries in the provision of the service. Thus these receptive qualities are weakened when a client organization does not have an internal department made up of experts in a given function (for example, a legal department in the case of the provision of a legal service).

These receptive qualities may also be affected by internal disputes and by unfavourable individual or group behaviour (a refusal to learn), particularly when the receiver feels threatened by the new knowledge.

This question occupies a position of some importance in the economic and socio-economic literature, where it is known by various names. In economic analyses that draw their inspiration from the phenomena of percolation in the physical sciences, it is denoted by the term receptivity [START_REF] Antonelli | Localized knowledge percolation processes and information networks[END_REF]. In sociology (and particularly in the sociology of science), the term translation capabilities is used [START_REF] Callon | Eléments pour une sociologie de la traduction. La domestication des coquilles Saint-Jacques et des marins-pêcheurs dans la baie de Saint-Brieuc[END_REF], while in the economics of technical change [START_REF] Cohen | Absorptive capacity: a new perspective on learning and innovation[END_REF], the term absorptive capacities is used. These absorptive capacities relate essentially to scientific and technical knowledge. Thus the receptive qualities that are the object of our analysis here can be interpreted as extended receptivity or extended absorptive capacity, since they relate to all the forms of knowledge that might be subject to processing by a KIBS provider (cf. § 1.1). These receptive qualities are to some extent given, but they can also be improved by the interventions of the KIBS provider.

The source of the knowledge may also have a certain number of characteristics that facilitate the flow of knowledge to a greater or lesser extent. As opposed to the receptive qualities discussed above, the propensity of a source to deliver up its knowledge will be denoted by the term transmission qualities. These transmission qualities also denote the cognitive aptitudes, the technical conditions and the attitudes of a source, which may be more or less favourable to the transfer or, conversely, retention of knowledge. Thus these transmission capacities are dependent on the nature of knowledge in question, on the cognitive characteristics (aptitudes) of the various elements that make up the source and on the attitudes of those elements to the sharing of knowledge. The transmission qualities of the source are generally increased when the knowledge is codified. They decline when this knowledge is regarded as strategic by the source (or its various components) or when the purpose to which the knowledge is put is likely, in one way or another, to call into question the source itself. Mistrust of this kind is not uncommon in audit services and, more generally, in knowledge-intensive business services of a therapeutic nature, that is those seeking to provide answers to what [START_REF] Kubr | Management Consulting : a Guide to the Profession[END_REF] calls corrective problems.

These transmission capacities are also partly given, but the service provider's intervention may help to improve them. Since a source must exist before transmission can take place, the first form that such an intervention can take is to locate the source of the knowledge, what [START_REF] Gibbons | The role of science in technological innovation[END_REF] call 'knowledge about knowledge'.

In fact, outside of the ideal-typical situation of the standard classical market, locating the source of the knowledge is not such an easy task. For this reason, the typology of knowledge drawn up by [START_REF] Lundvall | The learning Economy[END_REF], namely the know-what, knowwhy, know-how and know-who, needs to be supplemented by a fifth type of knowledge that we will denote by the term know-where. This additional type signifies the ability to identify and locate the place where the knowledge is to be found (that is the source).

b) Competences relating to the circulation of knowledge (logistical competences)

The circulation of knowledge may take a very simple basic form that we describe as the linear transfer of knowledge or basic logistical competence. Here, knowledge is reduced to the status of information. The service provider is regarded as a mere processor of information, a simple intermediary whose activity is limited to moving the information ('physically') from the source where it is located to the receiver who purchases it or who is designated by the purchaser. In this case, the knowledge is not modified as it moves from S to R: the input knowledge is identical to the output knowledge. Some market research services, the use of on-line databases and some aspects of recruitment consultancy or of the transfer of technical systems by IT consultants can be described in these terms.

This basic logistical competence is regarded here as an autonomous service.

Usually, however, the transfer or circulation of knowledge includes some form of knowledge processing, or in other words more complex competences. In most cases, indeed, this basic logistical competence is combined with other competences that reflect an aptitude for modifying the nature of the knowledge and its economic properties.

The links between the basic logistical competence and the other competences are complex. They may be implemented before the knowledge is circulated, or they may succeed it, accompany it or merge into one with it. If the categories outlined above are examined alongside a number of empirical studies [START_REF] Gallouj | Les formes de l'innovation dans les services de conseil[END_REF][START_REF] Gadrey | Manager le Conseil[END_REF][START_REF] Bessant | Building bridges for innovation: the role of consultants in technology transfer[END_REF]Miles et al., 1995;[START_REF] Bilderbeek | The new knowledge infrastructure: the role of technologies based knowledge-intensive business services in national innovation systems[END_REF], it is evident that the activity of KIBS providers involved in a service relationship can be described relatively satisfactorily in terms of six basic competences. Although they are difficult to dissociate from each other within the framework of any given service, these competences can be separated out analytically. They can be broken down into three groups, each containing two opposing principles, which describe the changes of state the knowledge undergoes as it flows between the source and the receiver. The first pair of competences describes the capacity to alter the form (codified or tacit)

taken by the knowledge in question. It is largely coterminous with, though somewhat more extensive than, the conversion mechanisms that [START_REF] Nonaka | A dynamic theory of organizational knowledge creation[END_REF] denotes by the terms externalization and internalization.

-Externalization is undoubtedly the most studied mode of knowledge processing, particularly because it is associated with the increasing importance of information technologies. Externalization is synonymous with formalisation, with codification (that is the 'conversion of knowledge into a message that can then be manipulated as information', Cowan and Foray, 1988) or even with 'forms investments' (that is the 'costly establishment of a relationship that remains stable over a certain period of time', [START_REF] Thévenot | Les investissements de forme[END_REF]. In the context of a KIBS relationship, and to use terms coined by [START_REF] Nonaka | A dynamic theory of organizational knowledge creation[END_REF], externalization denotes the transformation of knowledge that is tacit at the source into knowledge that is codified at the receiver. This transformation of the knowledge makes it easier to manipulate and gives it a certain stability.

Nonaka's definition can be extended to include a particular case already alluded to above, namely a situation that arises frequently in large firms whereby (useful) knowledge that exists within an organization is not recognised as such by the organization, irrespective of its form (tacit or codified). It is, as it were, involuntarily concealed (or tacit) because it lies outside the firm's capacity for introspection. As Kirzner (1979, quoted in Maskell and[START_REF] Maskell | Localized learning and industrial competitiveness[END_REF] observes, this type of knowledge highlights weaknesses in the standard theories of individual decisionmaking:

'Ignorance of knowledge that might be spontaneously, undeliberately absorbed can…never be explained in terms of anything other than itself. Such ignorance is simply there. It cannot be accounted for on the grounds of high search and learning costs, since no searching or learning is needed at all even, to repeat, at zero cost… Ignorance of knowledge that can be absorbed without decision is simply the expression and the evidence of a sheer failure to notice what is there to be seen. It can be given a namelack of entrepreneurial alertness-but it cannot be explained in terms of the standard economics of micro-theory, the theory of deliberate individual decisions (Kirzner, 1979, p. 145).

By deploying this particular externalization competence, and thereby making firms actively aware of knowledge they have hitherto ignored and helping them to However, externalization poses problems of appropriation for the service provider. It makes imitation easier. It is unlikely that a service provider will be able to sell the same knowledge twice to the same client, and it may be very easy for the client to duplicate that knowledge and diffuse it internally. However, as [START_REF] Senker | Knowledge and models of innovation[END_REF] and [START_REF] Callon | Le réseau comme forme émergente et comme modalité de coordination : le cas des interactions stratégiques entre firmes industrielles et laboratoires académiques[END_REF] in particular stress, some of the codified knowledge thus created is learned and applied tacitly. Moreover, the process of externalization itself is based on tacit knowledge that exists within the service-providing organization. Externalization cannot be taken for granted: it always depends on the extent to which the knowledge can be codified, which varies from case to case.

-Internalization denotes the transformation of knowledge that is codified at the source into knowledge that is tacit at the receiver. In this case, the service provider supports the client during the learning process (pedagogical function). Internalization requires the service provider to become involved voluntarily and actively in the client's imitation process. Internalization cannot be achieved without close interaction between the client and service provider. It enables the client to appropriate the knowledge more easily.

Here, the logistical competence and the internalization process become one and the same thing. Internalization may have another advantage over externalization. The cost of codification may be too high, particularly when the practices described by the knowledge are recursive in nature. Internalization eliminates the need to explain and codify ad infinitum.

Internalization transforms a public good into a private good with a high rate of appropriation. However, the knowledge transferred by means of this internalization competence can be used effectively only by the front-office staff in the client firm, since it is difficult to diffuse it rapidly throughout the organization as a whole.

the service provider is an exclusive one shared by the client and the service provider. It is not widely diffused beyond the group. Nevertheless, it should be noted that localization makes such diffusion not only difficult and costly (particularly in the case of tacit knowledge) but sometimes also useless (because of the local nature of knowledge).

In contrast to generalization, localization can be said to introduce 'cognitive distance' between the receiver and the external environment, which may reduce the diffusion of knowledge beyond the local level. If the receiving organization is a firm, localization increases the cognitive distance between firms but sharply reduces that within firms.

e) Competences relating to the structure or morphology of knowledge (architectural or combinatory competences)

In the course of a transaction, a KIBS provider may modify not only the form and scope of the knowledge in question but also its architecture. In order to highlight the two contrasting modes of the architectural or combinatory competence, we will replace the combination principle adopted by [START_REF] Nonaka | A dynamic theory of organizational knowledge creation[END_REF] and the accommodation principle developed by [START_REF] Noteboom | Innovation, learning and industrial organisation[END_REF] with the association and dissociation principles.

-Association involves supplying to the receiver, in combined form, items or sets of knowledge (of different forms) that were originally discrete. Although this is a fundamental principle of the production of innovation in the Schumpeterian model, association is being considered here in a more general and mechanical way as one of the basic knowledge-processing mechanisms, which does not necessarily produce innovation.

Association concerns not only codified knowledge (as in Nonaka's framework) but also tacit knowledge (the socialization mechanism comes into play once again here), as well as knowledge embodied in organizations, technical systems or individuals. Thus a range of different activities can be described by means of this basic mechanism: not only R&D, which involves the production of new knowledge (tacit or codified) from various combinations of old knowledge (tacit or codified), but also associations between different organizations (collaborations, alliances), and os on.

Like internalization, the tacit exchange of knowledge or the association of tacit knowledge (socialization) is a way of reducing the cost of codifying recursive knowledge.

-Dissociation, conversly, involves separating out a set of knowledge (of whatever form) in order to produce a different set of knowledge to be supplied to the client. As with association, the knowledge may be embodied in individuals, in technical systems or in organizations, and the process of dissociation may relate to the knowledge itself or to the media that carry it.

KIBS provider's intervention in the various dimensions of knowledge

Association

Competences involving the association of knowledge existing at S in order to produce different knowledge at R Dissociation Competences involving the dissociation of knowledge existing at S in order to produce different knowledge at R

Table 1 The competences of KIBS providers (modes of knowledge processing)

The seven basic knowledge processing mechanisms outlined above represent the various aspects of a multi-faceted interactive process, namely learning.

Here, this complex process involves the client and the KIBS provider. It has to be understood positively (learning in the strict sense), negatively (forgetting or unlearning) and neutrally (remembering), in other words as a mechanism for accumulating knowledge, for destroying obsolete knowledge (unlearning) and preserving a stock of knowledge (maintaining it at a given level). Thus it may be part of a KIBS provider's remit to destroy knowledge. Or, to put it another way, if learning is a cumulative process, then that cumulativeness is selective, since learning is a social phenomenon which, from the client firm's point of view, does not preclude creative forgetting (a means of dealing with the obsolescence of knowledge), or just plain forgetting [START_REF] Johnson | Institutional learning[END_REF]. These two types of forgetting may prompt service providers to help the client either to 'forget' or, in the second case, to relearn or to remember.

This learning process must also be perceived from the perspective of the 'beneficiary' (service provider, client) and of the object of the process (knowledge and the modes of knowledge acquisition). From the point of view of the service provider, learning (or unlearning) may take a number of different forms:

-learning, -teaching, that is imparting knowledge to clients through a variety of mechanisms, whether formalised (training) or not (learning by interacting),

-learning to learn (that is improving one's own absorptive capacity),

-teaching others to learn (that is improving their absorptive capacity).

These basic mechanisms, which describe some of the facets of the learning process, give rise to the following observations. 1) This typology of basic competences reconciles the typologies drawn up by Noteboom and Nonaka. It introduces a logistical competence that does not exist in these authors' typologies but which, on examination of the services actually supplied by KIBS providers, constitutes an important borderline case. It introduces the converse mechanism of association, which does not exist either in these two authors' typologies but which constitutes a not-insignificant mechanism for processing knowledge (and producing innovation) in KIBS, as well as in services in general. Generalization, association and dissociation are defined in such a way that they can be applied to both tacit and codified knowledge. Thus socialization does not disappear from our analysis but is incorporated into different principles.

2) The logistical competence comes always into play in the provision of KIBS, since what is involved is the transfer of knowledge from a source to a receiver. However, it is frequently incorporated into other mechanisms. This logistical competence (viewed independently) may also be regarded positively or negatively, since the transfer of knowledge may also be positive or negative (for example, redundancy, discarding of a software package).

3) Although the seven basic competences outlined above can be distinguished from each other in analytical terms, they are actually implemented in more or less complex configurations. Each of these competences can be mobilised independently. The competence in question then becomes one and the same thing as the service transaction.

Thus the provision of a given KIBS may consist of the mere circulation of knowledge:

certain market research or auditing services have already been mentioned above by way of example. It may also involve the adaptation of a generic solution to a local situation, and vice versa, and so on. More usually, however, a range of different basic competences is mobilised during the provision of a KIBS. In such situations, these various basic competences may be related to each other in various ways. For example, they may be deployed simultaneously or successively. Thus the association, generalization or logistical principles are frequently proceeded by implementation of the externalization principle, during which the knowledge in question is codified.

Localization often goes hand in hand with internalization, which explains why these two mechanisms are frequently confused in the literature.

The KIBS firm as a knowledge-accumulation system

In the previous section, our analysis focused on the processing of knowledge within the framework of a given service relationship, that is at the interface between source and receiver. This processing affects the (physical) circulation, form, scope and morphology of the knowledge in question. Another aspect of knowledge must be taken into account, namely its cumulative nature (cf. § 1.3). This aspect plays an extremely important role within KIBS firms, independently of any given service transaction.

Indeed, since the use of KIBS can be explained less by transaction costs than by cognitive differentials, the main objective of KIBS providers is to accumulate, capitalise and protect the knowledge derived from different service transactions, in other words to establish and maintain an organizational memory.

This organizational memory is important for several reasons. It constitutes one of the sources of knowledge that can be drawn on for input in any given service relationship (cf. Figure 1). It can also be drawn on in situations in which the KIBS provider is helping a client with an innovation process. Finally, it constitutes an essential source of cognitive raw material for innovation within KIBS firms themselves.

However, even while it is acting as a source of input knowledge in these three situations, the organizational memory is being further enriched by the knowledge crystallised in the solutions being developed.

The stock of knowledge on which KIBS providers draw for their main input is essentially the product of past experiences that have been memorised. Since they are the product of individual efforts, these experiences are embodied in individuals or groups of individuals. As a result, the organizational memory of KIBS firms is heavily dependent on the loyalty of its staff. The loss of certain members of staff produces an effect akin to amnesia or a cognitive haemorrhage. [START_REF] Stinchcombe | Interorganizational relations and careers in computer software firms[END_REF], for example, described IT service providers as 'precarious monopolies', constantly prey to the risk that their best experts will leave, taking with them the expertise that is also publicized by the companies, which further increases the risk of defections.

However, a part of each individual experience exists in codified form.

Documents, reports (as hard copies or in electronic form), software, films, recordings, models, prototypes and technical systems are constantly circulating among the various actors engaged in the provision of a given service. This type of knowledge is more easily accumulated. It transforms individual experiences into a collective memory that can be drawn on at any time and in any place by all the members of the organization.

The largest KIBS firms, which are very conscious of the phenomena associated with knowledge localization and their perverse effects, particularly the formation of cliques that may cause the organization to fragment [START_REF] Granovetter | The strength of weak ties[END_REF], routinely put in place codification or externalization strategies. These strategies may take various forms: the accumulation of knowledge derived from experience in databases, the use of structuring methods and so on.

However, it should not be concluded that the trade-off between externalizationgeneralization and internalization-localization is always resolved in favour of the first pair. In reality, there is a dialectical relationship between the two that can be interpreted by means of a paradoxical mechanism that [START_REF] Eisenberg | Ambiguity as strategy in organizational communication[END_REF] calls 'unified identity', that is some degree of balance between two apparently contradictory mechanisms, namely a diversity of interpretations and their simultaneous unicity (that is the construction of consensus).

From the KIBS provider's point of view, what really matters is the establishment of a cognitive differential between the organization and its clients. In other words, it needs to expand its organizational memory. This is achieved through the combination of two knowledge-accumulation strategies:

-accumulation in individual memories, that is the training of individuals and the recruitment and outplacement of experts. Training may be formalised or take place on the job (internalization and socialization principles in Nonaka's sense of the terms). The recruitment of experts may expand the memory quantitatively or mechanically (recruitment of an additional expert in order to strengthen and existing speciality) as well as qualitatively (recruitment in a new area of expertise). Outplacement also reflects a qualitative change in the memory, particularly when 'up or out' strategies are being implemented.

-the accumulation of knowledge on inanimate media, that is the codification of knowledge in libraries, databases, expert systems, methods, standard contracts, publications and so on.

The first of these knowledge-accumulation strategies produces diversity and creative ambiguity. The second produces unity, or common knowledge. Once combined, they generate 'unified diversity'.

Knowledge processing and innovation in and through the use of KIBS

The question of knowledge processing is closely linked to that of innovation, particularly in the evolutionary approach. Like innovation, KIBS are often defined as activities intended to resolve selected (and sometimes 'reconstructed') problems.

However, the notion that all KIBS transactions are to be regarded as innovations should be rejected. Thus one important problem that has to be resolved in any economic analysis of KIBS is that of the boundary between a routine or standard service and an innovative service.

The link between innovation and KIBS can be considered from two different, though not unrelated perspectives, namely that of innovation produced through the use of KIBS and that of innovation within KIBS themselves.

Innovation through the use of KIBS

We are dealing here with the role that KIBS can play in assisting client firms to innovate. Two different scenarios can be envisaged.

In the first, the KIBS is mobilised in order to provide the knowledge-processing competences required for an innovation project (whether technological, organizational or strategic in nature) that has been fully identified as such by the client.

In the second, the KIBS is called on to play a part in a 'non-programmed' innovation that will be denoted by the term 'ad hoc innovation'. This scenario will be examined in greater detail in the following section, since it involves both innovation through the use of KIBS and innovation within KIBS themselves.

Whatever the scenario under consideration, this model of KIBS-assisted innovation can be broken down into four component parts [START_REF] Gallouj | Interactional innovation: a neoschumpeterian model[END_REF]:

1) The functions (F) of the client firm that are the object of the innovation. The innovation may concern one or more of the firm's functions (legal, IT, research and so on). A functional approach of this kind to the object of innovation has several advantages. It is consistent with certain KIBS typologies that define service providers in terms of the main function of the client firm on which they act in order to produce change (the legal function in the case of legal consultants, for example). It also facilitates the introduction of a broadly-based, open concept of innovation, which encompasses not only new products and processes but also new strategies and new forms of organization. The adoption of a functional approach to the object of innovation makes it possible to analyse in much greater detail these last two categories (particularly organizational innovation), which very often serve as residual, catch-all categories. Moreover, this functional approach, located upstream of products and processes, can be used to explain innovation in manufacturing and services with a certain degree of consistency (whatever the possible differences in content between the corresponding product and process innovations).

2) The degree of interaction (C) between the service provider and client around the innovation project or emerging innovation. In the case of 'non-programmed' innovation, the degree of interaction around the innovation becomes conjoined with the degree of interaction involved in the provision of the service. In the case of an innovation project identified as such from the outset, the interaction revolves entirely around the innovation. The client participates to a greater or lesser extent in the provision of the service. In many cases, a non-programmed innovation emerges out of an intense service relationship. When a service provider is taking part in a clearly identified innovation project, the degree of interaction is highly variable. In particular, it depends on the stage of the process at which the service provider is called in. Indeed, the service provider may be called on before the innovation project proper gets underway in order to supply simple codified information, such as that produced by market surveys, which does not require any real interaction.

3) The stages of the innovation process (I) at which the service provider is called in. This process can be conveniently represented in terms of the following traditional sequence: 1) the gathering of information and ideas, 2) research (whether basic or applied), 3) design and development (including testing or experimentation), 4) the production of the solution, 5) the marketing of the solution (or its pseudo-marketing when it is to be diffused within an organization).

From the client firm's point of view, this process of innovation is never a linear one. The sequence outlined above is merely an heuristic device: the various stages may not all take place, some may overlap (that is take place simultaneously) and others may merge with each other (in services, for example, production and marketing are frequently synonymous).

From the service provider's point of view, this process (I) may also be approached in various ways. He may be called on to intervene in one stage only or in several stages. He may also be called on to take responsibility for the overall coherence of the project. Finally, several different providers may be called on to provide their own particular specialist services (marketing consultants upstream of the innovation, R&D laboratories, legal consultants downstream of the solution, and so on). The strategies adopted by the major international auditing and consultancy companies are designed to make available to their clients a whole range of services in an integrated way [START_REF] Gadrey | Manager le Conseil[END_REF].

4) The various knowledge-processing competences (T). These competences are those outlined in section 2 above, that is the basic logistical competences, together with those of externalization, internalization, generalization, localization, association and dissociation.

A service provider called in to assist a client engaged in innovation may mobilise one, some or all of these competences. As Figure 2 shows, the model of KIBS-assisted innovation may take a multiplicity of configurations equating to sets I, T, F, C. One particular configuration merits particular attention, namely the one that describes the mobilisation of basic logistical competences within the framework of an innovation project. This configuration, which might be described as the standard configuration, consists of the simple transfer from source to receiver of codified information, without any real interaction between processor and receiver and irrespective of the various components of the innovation process and of the functions being considered.

Upstream Downstream

Client firm functions that are the objects of innovation (F)

Low High

Degree of co-production or interaction (C)

The boundary between a KIBS provider's normal problem-resolving activities and his contribution to innovation is a fragile one. For example, legal services routinely provided by lawyers involve the processing of knowledge on behalf of clients. Such processing implies the implementation (in a multiplicity of configurations) of transfer, internalization, externalization, association, dissociation, generalization and localization competences. Even when he is producing a novel legal solution on behalf of a client (an innovation), a service provider is calling on the same knowledge-processing competences. In both cases, the competences mobilised are, to varying degrees, vectors of novelty, depending on whether they are exploitation competences (for example, generalization) or exploration competences (for example, association).

Thus it is not the modes of knowledge processing (that is the competences) that define innovation by services (innovation does not occur solely when the Schumpeterian combinatory mechanism is brought into play), but rather the existence, a priori, of a clearly identified innovation project or the recognition, a posteriori, of an innovation and its designation as such (what might almost be called its social construction). In our model of KIBS-assisted innovation (cf. Figure 1), this innovation is represented by the

[I] axis. This means that, when a service provider takes part in an innovation project with a client, the service provider is a (co)-producer of the innovation, even if the only competences mobilised are those that would ordinarily be mobilised when a normal service is provided. Thus there is no theoretical reason why the activities of external KIBS providers should be excluded from definitions of innovation indicators (as certain national and international statistical institutes do, for example, particularly the OECD).

Innovation in KIBS

Although KIBS providers assist their clients in the production of innovation, they may also innovate internally. In order to understand the nature of innovation in this type of activity, we must not allow ourselves to becoming entrapped in traditional categories.

Rather we must seek to supplement and adapt them. Since KIBS providers process and produce knowledge, it seems to us appropriate to consider the innovation they produce in the same terms. Empirical studies [START_REF] Gallouj | Les formes de l'innovation dans les services de conseil[END_REF] have revealed various types of innovations that can be inferred from a particular relationship to knowledge.

Innovation can be defined as the creation of new knowledge in order to resolve a problem. This new knowledge may be created intentionally, as is the case with 'new fields of knowledge innovation' and 'formalization innovation'. However, it may also emerge unintentionally out of various activities, as is the case with ad hoc innovation.

1) Ad hoc innovation is a solution (that is a set of knowledge) that allows a certain degree of new light (we are dealing here with an incremental innovation) to be shed on a firm's (legal, organizational, strategic, technical and so on) problem, without it necessarily being possible to transfer the solution in toto to other firms. Ad hoc innovation requires the service provider to have detailed knowledge of the client firm's problem, knowledge which is usually generated through an extremely interactive relationship. Thus ad hoc innovation is co-produced. It is also an innovation produced within KIBS and through the use of KIBS. It depends heavily on the competences of socialization, internalization and localization. As a result, it poses problems of appropriation and pricing. However, once this ad hoc innovation has been produced, the externalization and generalization competences are deployed in order to incorporate it into the service provider's organizational memory so that certain elements of it can be reproduced elsewhere. In this way, ad hoc innovation (output knowledge) is transformed into input knowledge.

2) New fields of knowledge innovation. By analogy with Schumpeter's categories, and in view of the fact that, for KIBS providers, knowledge is both input and output, we can say that 'new fields of knowledge' innovation encompasses 1) new products, 2) new markets and 3) new sources of raw materials. 'New fields of knowledge' innovation denotes the accumulation of input knowledge relating to emerging spheres of knowledge (the Internet is perhaps the best current example) with a view to providing services (output knowledge) in these new spheres. The degree of novelty here is greater than in ad hoc innovation.

The principal (internal) competences deployed in this process of knowledge accumulation are characterised by their diversity: reciprocation (analogy, metaphors), combination and externalization. However, since the new sphere of knowledge is initially a quasi-public good, with the economic properties characteristic of this type of good, certain specification and consolidation activities are required in order to establish a dominant design that can then be appropriated.

3) Formalisation innovation. This term denotes a heterogeneous group that includes all the mechanisms that serve to give form to the service in question (process, methods, organization and so on). It relies heavily, therefore, on all the knowledge-processing competences that give solutions a certain degree of 'visibility' and 'stability'

(externalization, generalization and so on).

Conclusion

If firms are processors of knowledge, as some recent studies suggest [START_REF] Fransman | Information, knowledge, vision and theories of the firm[END_REF], then KIBS firms are the best possible exemplification of the thesis, since knowledge, in all its forms, is both their main input and their main output.

We have been concerned in this paper with the activities of KIBS providers, the main objective of which is to make knowledge-processing capacities available to clients.

These capacities can be described satisfactorily in terms of a certain number of basic mechanisms (which we have denoted by the term competence) that modify the spatial characteristics, form, scope or architecture of the knowledge in question.

These are the same basic mechanisms (competences) that are mobilised in innovation projects (whether ad hoc or identified as such). Nevertheless, it should not be thought that all KIBS transactions constitute innovations, and although the knowledge-processing competences may be either exploitation or exploration competences (March, 1981), what distinguishes a routine service from an innovative service is the existence of an innovation project or its 'social construction' or designation as such in the course of service delivery.

As far as innovation in KIBS is concerned, it cannot be said to be independent of innovation through the use of KIBS. Indeed, both forms of innovation draw on the same organizational memory and feed back into the same memory. Moreover, the highly interactive nature of many knowledge-intensive business services confuses the ownership regimes of certain forms of innovation.

There is some value in considering the nature of innovation in KIBS in cognitive terms by virtue of the cognitive nature of the input and, particularly, the output of such services. The various forms of innovation thus revealed are also related in specific ways to the various basic knowledge-processing mechanisms.

v For a review and more detailed discussion of these questions cf. in particular (to cite just a few recent studies) [START_REF] Dasgupta | Towards a new economics of science[END_REF], [START_REF] Cowan | Economie de la codification et de la diffusion des connaissances[END_REF], [START_REF] Callon | Le réseau comme forme émergente et comme modalité de coordination : le cas des interactions stratégiques entre firmes industrielles et laboratoires académiques[END_REF], [START_REF] Antonelli | The evolution of the industrial organization of the production of knowledge[END_REF] and [START_REF] Foray | Economie de la connaissance[END_REF].

vi Etymologically: 'lead or take away…'

  rediscover and create it socially, KIBS providers are helping to stimulate what Kirzner (1979) calls 'entrepreneurial alertness'. More generally, the aim of externalization is to facilitate the transfer of knowledge by reducing transaction costs (Zander and Kogut, at 1995). Thus externalization facilitates the implementation of basic logistical competences. It facilitates the absorption of knowledge by the client (learning) and increases the service provider's pedagogical efficiency (teaching).

Figure

  Figure 2 : the KIBS-assisted innovation model

d) Competences relating to the scope of knowledge (competences of scope)

The second pair of competences reflects the evolution of the scope of knowledge. It contrasts competences relating to generalization with those relating to localization, which cover the same ground as but are not to be confused with the principles of generalization and specification developed by Noteboom (1989). Evolutionary theory, in particular, has attributed a key role to localized technological knowledge [START_REF] Antonelli | Localized knowledge percolation processes and information networks[END_REF][START_REF] Antonelli | The evolution of the industrial organization of the production of knowledge[END_REF].

-Generalization denotes the process whereby knowledge (tacit or codified) that is specific at the source is transformed into knowledge (tacit or codified) that is general when it reaches the receiver. This competence extends the range of application of a particular item of knowledge, or its audience (the scope of the 'knowledge about knowledge', as it were). Nonaka's notion of socialization could be regarded as a particular case of generalization, to the extent that it is an instrument for the generalization of tacit knowledge. This socialization requires a degree of interaction that is at least as high, if not higher, than that required for internalization. In implementing the generalization principle, KIBS providers are helping to reduce 'cognitive distance' [START_REF] Noteboom | Innovation, learning and industrial organisation[END_REF] both inside and outside the receiving organization (the cognitive distance between and within firms if the organization is a firm). Thus it encourages what might be called 'cognitive alignment', which facilitates the exchange of knowledge.

-Localization (or differentiation or specification) is the transformation of knowledge that is general at the source into knowledge adapted to the local context of the receiving organization. Again, this knowledge may be both tacit and codified.

Localization increases the extent to which the knowledge can be appropriated by the client. Of course, this appropriation is made all the easier by the tacit knowledge put in place by the localization process. In this case, the solution proposed or co-produced by


Introduction

Jean Gadrey and Faïz Gallouj University Lille 1, CLERSE By the end of the twentieth century, developed economies have been characterized in multiple ways: information economies, knowledge economies, post-industrial economies, and recently " new economies ". But from a factual standpoint, nothing is as massively evident as the strong and continuous growth, for decades, of the share of services in employment and in GDP (in nominal terms). Now, although economists and social scientists have produced for a long time remarkable works on these activities, on the explanations of their growth, and on the new related economic and social challenges, one can say that the relative weight of the researches on services is still lagging behind the relative weight of services in economic practices.

Among the main research topics concerning services, there are those of their productivity (and more generally of their performances) and that of the innovation in services and through services. These two questions are obviously connected, if one admits that medium-term and long-term economic performances are strongly linked to the dynamism of innovation. This double issue is at the center of the present book, stemming from an international conference held in Lille and Roubaix (France) in June 2000 and attended by most of the leading researchers on these topics.

All the authors of this book have a long research experience on services, both theoretical and empirical. Their strong empirical knowledge of these activities leads most of them to diagnose the existence of a gap, often very marked, between the stylized facts that they display, and the traditional economic tools intended to interpret these facts. Productivity in services is a puzzle in many so-called "stagnant services", where existing data, provided by national accountants, show little or no increase in productivity, while closer empirical observations and case studies show an impressive dynamism of these sectors, comparable to the dynamism of manufacturing sectors. How to reconcile these two opposite views? Several arguments have been put forward, but none seems to account for such a "cognitive gap". This is why the hypothesis of a mismeasurement and "misconceptualization" of many service outputs should not be rejected.

It is not our contention that the main economic tools (growth, productivity, or the substitution of capital to labor, among others) currently used for such purposes should be abandoned, far from it. A large part of the actual measurement methods can possibly be improved, especially in the vast field of service quality assessment. But one has to ask whether this type of "incremental" improvement will be sufficient to grasp efficiency and quality gains in sectors such as health, education, social and care services, finance and insurance, and even retailing and eating and drinking places. More "radical" conceptual innovations are likely to be needed. This book provides some clues for both types of innovations regarding the economic performances of services.

The same holds true with innovation in services and through services. No doubt, a lot of existing theories and concepts are extremely powerful to understand part of the innovation processes in services. For example neoschumpeterian theories which take into account in a certain extent, the diversity of technological trajectories in services, But also neoclassical approaches (Baumol, this volume).

But at the same time, most of the existing conceptualizations (and the corresponding measurement methods, classifications used in national surveys, etc.) remain more or less industrialist and "technology-biased". They fail to integrate certain essential dimensions of innovations in services.

Just as they are considered to only reach weak productivity levels, so services are often said to be incapable of innovating or to confine themselves to adopting technological innovations originating in manufacturing industry. A conception of this kind can cause serious difficulties in an economy dominated by services, since it precludes serious thought (particularly on the part of the public authorities) about ways of energising an area of activity of great importance for the future of firms, industries and nations.

These misconceptions have their origins in the manufacturing and technological bias of our analytical apparatus. In standard neo-classical economics, the question of innovation is perceived through the concept of the production function and is limited to process innovation (as incorporated into technical equipment). From this perspective, it is but a short step to reduce innovation in services to the mere adoption of technical equipment produced by the only supposed driving force capable of innovation in the economy, i.e. manufacturing industry. Thus the main body of literature implicitly or explicitly related to innovation in services focuses on the following generic theme : the spread and the impact of the new (informational) paradigm on services.

Recent economic analyses (based on evolutionary and neo-Schumpeterian approaches), which are more sensitive to the characteristics of the "black box" of the firm, i.e. to learning phenomena and the mediums through which they are enacted (routines) and to the tacit and idiosyncratic aspects of technologies, and more inclined to accept a broader definition of innovation, have not succeeded in ridding themselves of this technological bias. In such analyses, services are generally dominated by the suppliers of their technical equipment. This general conception of the technological and adopted nature of innovation in services has certain corollaries that it is important to emphasise. Services are, allegedly, as unacquainted with R&D as they are with innovation, despite the large number of engineers and managers now employed in service industries. And the proof is that national and international indicators of R&D and innovation (the Frascati and Oslo manuals, for example) almost completely ignore service specificities.

As we shall see, the five chapters devoted to innovation in services go beyond this technological bias, while basing upon various theoretical perspectives (neoclassical, neoschumpeterian). These chapters not only focus on service innovation specificities, but two of them (chapters 10 and 11) also reverse the subordinate relashionship between manufacturing and services as far as they focus on the active role played by knowledge intensive services in their clients' innovation process (including those in manufacturing industry). William Baumol's chapter goes even further in the rehabilitation of services as far as it recalls that R-D is a prominent service activity.

A Detailed Summary of the Book

Traditional measures of productivity growth show very low gains made by service industries since 1979 in the United States. However, other indices of "technological activity" show that service industries have actually been more technologically active than goods producing industries over this period. In chapter 1, Edward Wolff investigates different indicators of technological activity among goods producers and services. For example, services have invested much more heavily in computerization than goods-producing industries (about triple since 1977). The educational attainment of the work force and other skill indices are greater in services than goods producers over this period. Moreover, the degree of change in the occupational composition of employment has been almost as great among service industries as in goods industries since 1970.

The upshot of the chapter is that so-called stagnant services, as portrayed in the standard cost-disease model, are not technologically inert. Though these industries show up with close to zero productivity growth, they are very active and have undergone major change over time by other technological indices. Indeed, by some of the indices (mean skills, mean schooling, share of knowledge workers, investment in OCA, and age of capital) these sectors are more technologically active than goods producers or progressive services.

Is the poorer productivity performance of services in recent years due to the fact that its output is becoming increasingly more difficult to measure? This could be a substantial part of the explanation. The distinguishing features of service industries in the post-1980 period are both its high rate of computerization and its high degree of employment restructuring. It is likely that both are associated with a more heterogeneous output. The high degree of computerization found in finance, for example, has been responsible for the creation of a bewildering array of new financial products. The same appears to characterize the insurance industry and business services. Likewise, the fact that the degree of employment restructuring increased substantially between the 1970s and 1980s might be associated with an increasing variety of service products. It is possible that the more heterogeneous output has made service output harder to measure over time, and thus the low productivity growth of services after 1980 is a measurement problem. But there are two other possible explanations. The first of these might reflect the high adjustment costs associated with the introduction of new technology. According to this line of argument, productivity growth of the so-called stagnant services should increase to more normal levels in the future as the IT revolution is realized.

The second explanation is that service providers are now able to use this new technology to expand profits in other ways besides augmenting productivity. In particular, services may be employing IT for product differentiation rather than productivity enhancement. If this is the case, then the low productivity growth measured for the stagnant services might persist into the indefinite future.

In chapter 2, Jean Gadrey shows that serious measurement problems stem from conceptual issues regarding the definition of "output" in many "stagnant" services. This chapter is a summarized version of the conclusions of a research carried out between 1989 and 1992 in close cooperation with Thierry Noyelle and Thomas Stanback (Columbia University). This research concerned a comparison between France and the United States about productivity in services. The question was as follows: is it true that in the United States the productivity in services is weaker and that productivity gains are lower than in France, and can this explain that job creations are massive in the American service sector, and modest in France? This interpretation was very widespread in the early 90s, and it is still put forward today. According to Gadrey, this explanation is, for the main part, an illusion, and the main answers to the question are of conceptual and methodological nature. Furthermore, by showing the limits of the traditional concepts in the case of an international comparison, one also obtains useful indications to interpret, in each country, the so-called " productivity paradox ".

In most services the U.S. appears to have a real technological and organizational advance. Not all service technological characteristics are lagging behind in France. But, in most of the comparisons undertaken, the gap is significant. How is it possible to reconcile the undoubted technological and organizational U.S. leadership in many services with its very poor productivity records? Gadrey's answers to this paradox can be summarized in two major points:

A-First point: the functional approach to service activities Most service industries can be analyzed, in terms of "production function", as a combination of three sets of functions: the informational functions, the functions of material logistics, and, the direct service functions, associated with the face-to-face contact with clients, with care and assistance to customers, advice and so on.

What appears in the case of the U.S. service industries, as compared with their French counterparts, is a noticeable higher level of efficiency in the first two fields (those where most advanced technologies can be introduced) and a greater amount of direct service provided, with relatively more people employed to fulfill this third category of functions. Thus, if one uses, as it is generally the case, traditional output measurement (e.g.: amount of goods sold in retailing, number of people admitted in hospital, possibly with a complexity index, ton x kilometers in air transportation, premiums or losses incurred at constant dollars in insurance, etc.), that does not take account of the amount of direct service produced, one is likely to conclude that the overall efficiency of labor is relatively poor in the U.S.

B-Second point: the conceptual approach to services output

The core idea can be grasped from one question, stemming from one of the five case studies undertaken by Gadrey and his colleagues: in the supermarket industry, do we get the same output when, for the same basket of goods bought, we get our purchases bagged, home delivered if needed, sometimes carried to our car; when we have fifty percent more varieties of offerings (stock keeping units) to choose among; when opening hours per week are twice as high; when there exists a customer assistance counter; when more scanning systems save our time at the checkout counter; and, finally, when, besides this identical basket, we have the possibility of buying hot take-out food and other kinds of prepared food (e.g. from salad bars)? What the French-U.S. comparison shows is that more people are employed in the U.S. typical supermarket, for roughly the same volume of goods traded, not on account of a lower "productivity", but essentially because the U.S. supermarket output is very different, insofar as output is analyzed as a combination of services associated with the trade of goods, and not simply with the volume of goods themselves (the usual method based on sales at constant prices).

And, what is more, if such a (more complex) service-based approach is used, it can be shown that, during the eighties, the average U.S. supermarket has clearly increased its performances in terms of quality and quantity of services delivered, leading to a decrease of its "productivity" (according to traditional measures), while its French counterpart was rather improving "productivity" by containing its service component and developing the "selfservice" and large scale strategy pioneered in the U.S., during the fifties, sixties, and early seventies. This example indicates the orientation: in a service economy, we need to revisit deeply the traditional output concepts and measurement methods and we need to evaluate the significance of a rising level of service provided.

In the last part of this chapter, Jean Gadrey show that improved and more complex procedures might be used in order to provide better estimates of efficiency changes in services. This implies, in most cases, to introduce the main variables neglected in the traditional approaches: service complexity, intensity, and outcomes.

In chapter 3, Bernard Chane Kune and Nanno Mulder provide an international comparison about productivity in the transportation sector, with a focus on total factor productivity (TFP). Indeed, the efficiency of service providers is often approximated by labor productivity. This partial measure is seen as a proxy of overall efficiency as services are supposed to use relatively little capital. However, in many services such as transport, capital is a major production factor. To judge the overall efficiency of these services, labor productivity measures should therefore be complemented by measures of capital and total factor productivity. For France, capital productivity and TFP could not be estimated so far at the sectoral level of transport, as no capital input estimates were available. This chapter aims to fill this gap by providing new detailed estimates of capital input in French transport from 1970 onwards. These data are used in combination with series on output and labor input to estimate productivity. Finally, the French performance is compared with that of Germany, the United Kingdom and the United States.

In contrast to many other studies on productivity, the contribution of capital to production is not measured by the value of the stock of assets but by the volume of services rendered by this stock (also referred to as the Jorgenson approach). Capital services are measured by the product of the volume of capital, approximated by the net capital stock, times its user cost. The latter is estimated by the sum of depreciation, the real interest rate and capital gains. The net stocks of transport equipment in air and maritime transport are measured by administrative records. The stock of other assets is estimated by the perpetual inventory method, which sums several years of capital formation and deducts assets that reached the end of their service life. Detailed series were compiled of investment and discards in eight different parts of transport, showing for each a breakdown into infrastructure, transport equipment, and other machinery and equipment.

In the second part of the chapter productivity results are presented. Total factor productivity is estimated using the Törnqvist discrete approximation to the Divisia index. The variance of productivity patterns across transport sectors is not unique for France, as is illustrated by a comparison with Germany, the United Kingdom and the United States.

Overall productivity gains in the Germany and the United Kingdom were similar to those in France. The three European countries outperformed the USA. At the sectoral level, it turns out that air transport is the industry with the largest capital gains in all countries. The USA is the only country with large productivity gains in railways. France outperformed other countries in terms of productivity growth in air and maritime transport. In the other industries, French productivity growth was below that of the other countries.

In chapter 4, Pascal Petit ….

In Chapter 5, Jacques De Bandt and Ludovic Dibiaggio deal with the so-called " learning " economy as a source of conceptual difficulties, needing new theoretical categories as far as performances are concerned. At least in developed countries, productive systems have been undergoing, since the beginning of the 70's, deep and wide-ranging changes. Of particular importance, among these changes, has been the growth of activities related to information (computers and software, information systems and related activities) and, particularly in the 80's, the development of R&D activities and systems of innovation.

This chapter puts the emphasis on a set of new phenomena and realities, of which it can be shown that they cannot be handled within the framework of the old industrial paradigm. A new paradigm is required, referring essentially to the role of knowledge in production and value creation. At the core of this analysis is the capacity to produce knowledge as a response to specific questions (or problems, needs...) where the question, in turn, is a source of knowledge creation. Distinctions have to be made between different types of knowledge with various degrees of complexity and between different forms of organization of productive systems.

Knowledge status depends essentially on the context of its use. Rather than simply emphasizing knowledge intensive activities, De Bandt and Dibiaggio focus on the level of commonality of the environment of knowledge re-use. Indeed, knowledge standardizationthrough codification or through routinization -depends on the reproduction of experimented actions or decision in similar contexts. As a consequence, introducing ICTs may of course improve knowledge standardization. But new technologies may also increase the set of problems to be solved, users' expectations and opportunities for knowledge creation.

Following this framework, the authors define a typology of contextual situations that affect the nature of the cognitive process as it is implemented. They put forward simple, problem-solving and complex situations as three archetypes of decision-making or learning situations. Each situation-type depends on the familiarity of the agent with the question he has to answer, the problem he has to solve or the situation in which he has to behave. In all situations in which only "simple" knowledge has to be produced, either because the situation is simple or because it can be simplified, ICTs can perform the tasks and induce considerable efficiency gains. Some progress is equally possible in some of the "problem" situations, to the extent that certain standardization procedures are feasible. But there is simultaneously another trend, towards contextual specificity, customization, and complexity.

Because of the competence requirements, complex knowledge needs essentially to be coproduced within organizational learning processes. Co-production -which is at the hart of the "service relation" -thus becomes a central aspect of the new modes of production.

In chapter 6, again, knowledge and its standardization are at stake, but from a sociological or "socio-economic" perspective. In this chapter, Emmanuel Lazega looks at the relationship between distributed knowledge and economic performance in a professional, or " collegial ", organization. He identifies a few conditions under which the pattern of knowledge flows is most productive for firms stressing quality professional services. In such organizations, the production of services for clients is difficult to routinize, professional expertise and advice cannot be easily standardized, and therefore "internal" transaction costs related to flows of resources, including knowledge, can be assumed to be a large part of total costs for the firm as a whole. The practical problem for professional services firms can be represented as reducing complexity and constructing certainties in order to learn from its own experience and provide quality advice for clients. To achieve such knowledge intensive work on a regular basis, intelligence is shared in two types of situation at least: in common work on cases or in case-related advice relationships. Saying that intelligence is " shared ", however, does not do justice to what really happens in the flows of intelligence. The important characteristic of such flows is shown to be that knowledge as a resource is efficiently distributed/allocated through two processes: selection of exchange partners who share common identities in dense subsets (social niche seeking) and concentration of the authority to know (through status competition). Some members emerge as having the authority to know, although such status is fragile. This allocation of knowledge is a micropolitical learning process, but it is efficient too. Efficiency can be measured, it is argued, in statistical evidence concerning the relationship between crude measurements of economic performance and position in social networks related to the allocation of knowledge. An empirical study of a medium sized Northeastern U.S. corporate law firm is used for that purpose. Distributed knowledge is measured through two types of networks: a network of co-workers with whom the " Whole Picture " of the case is shared, and the Advice network within the firm.

Members' individual performance data (hourly rates, number of hours worked, fees brought in) are analyzed as an effect of position in this network. Dependence of economic performance on the overall pattern of ties in the two networks is established. This suggests that proxy measurements -based on social network analysis-of productivity are possible in knowledge-intensive organizations, a thorny issue in contemporary economics.

Chapter 7 is devoted to research and development. William Baumol recalls us that R-D is a service activity and that it is likely to be the king of services and of the economy as a whole as far as it has major effects on income levels and competitiveness of firms and nations. The leadership of R-D means services are no longer laggers in our economies, but conversely, leaders.

More precisely, Baumol's paper deals with two closely linked issues : 1) the effect of R-D on productivity growth and 2) the reverse effect of productivity growth on R-D. Connecting these two previous effects and relying on an extended version of the well known " cost-disease model ", it builds a feed back model between R-D and growth. This feed-back relation is an addition to endogeneous innovation models. It goes beyond them as far as it tries to take into account the historial dimension. It aslso tries to make more explicit the endogeneous determination of innovation.

The first issue (the effect of R-D on productivity growth) is a well known one in the literature. Basing upon Outlon theorem, Baumol shows that the growth of overall productivity generated by R-D is likely to be greater than might have normally been expected.

There are more troubles with the second issue (the effect of productivity gowth on R-D) and these troubles are linked to the cost-desease of services that are " asymptotically stagnant ". Indeed R-D belong to such a group of services, which means that its productivity growth is behind the rest of the economy.

In chapter 8, Ian Miles draws a survey of services innovation studies. Different steps are identified in the evolution of these studies. 1) Services were for a long time neglected. They initially represented a negligeable economic area. What was important at the begining of political economy was agriculture and manufacturing.

2) Then services began to account as an important economic phenomenon (major par of employment and GDP in developed countries). But anyway the analysis of innovation studies suffered from inertia and has lagged behind the recognition of the importance of services. The major part of the studies put their emphasis on trying to explain the tertiary growth and not to better understand the meaning of innovation in services, which as a matter of fact was supposed to be very limited.

3) Barras' model is often considered as the first attempt to build a theory of innovation in services. It shares with other models (especially evolutionary taxonomies of technological trajectories in services industries) and surveys a concept of innovation limited to technological dimension and which is formalised in OECD manuals. 4) Several studies and surveys have been carried out recently in order to go beyond this technological bias. Thes studies focus on service specificities both in terms of nature of innovation and of models of innovation organisation.

5) The main conclusion of Ian Miles' chapter and the last step of the evolution of service innovation studies is that there is a tertiarisation on innovation studies. That means that while understanding service innovation issues we are likely to shed light on innovation in the whole economy far beyond the mere service sector. There are several reasons of this tertiarisation : manufacturers often have several service activities in which they may innovate, KIBS play an important and growing role in the whole innovation system. The main conclusion of this chapter is that as far as they play a major role in transferring, crating and combining knowledge, KIBS should be considered as " a second knowledge infrastructure " by analogy with the " public knowlege infrastructure ", ie research and technology organisations, Higher Education Institutions.

In

Chapter 11 by Faïz Gallouj has two main goals. Firstly, it seeks to describe a normal service transaction in terms of the various basic modes of knowledge processing and production used by KIBS firms. The main activity of the service provider can be described as the transfer of knowledge from one or several sources to a receiver (the client considered from different analytical point of view). The term transfer denotes the various interventions of the KIBS provider in the different dimensions of knowledge : its (physical) circulation, its nature (tacit versus codified knowledge), its scope (general versus specific or localised knowledge) and its structure (association, dissociation of knowledge). However, the quality of the previous interventions of the KIBS providers also heavily depends on qualities of the sources and the receivers.

Secondly, the chapter seeks to establish the links and boundaries between a normal transaction of this kind and innovation. Two difficulties have to be overcome here.

Firstly, the same knowledge processing basic mechanisms are mobilised both in innovation projects and in normal service transactions. But this shouldn't lead to conclude that all KIBS transactions constitute innovations. Secondly, It is necessary but difficult to distinguish innovation in KIBS from innovation through the use of KIBS, ie the contribution of KIBS providers to innovation in their client organisations. Indeed both forms of innovation draw on the same organisational memory and feed back in the same memory. Moreover, the highly interactive nature of many knowledge intensive business services confuses the ownership regimes of certain forms of innovation.

  Chapter 9, Maria Savona tries to test the existence of different growth models and different innovation profiles among services. Her work is based upon the Community Innovation Survey (CIS) data in Italy. It follows the taxonomic tradition opened up by Keith Pavitt in an evolutionary perspective. The main hypothesis of Savona's model is that innovation capacity of service providers is a function of the type of client, ie of the nature of the demand (distinction between intermediate and final demand). The factor analysis implemented identified three innovation trajectories differing according to the type of demand and the innovation intensity : -The highly innovative/dominance of intermediate producer demand (this first profile is characterised by a high innovation intensity, its carries out a specialised market oriented R-D activity) -The medium innovative/dominance of public demand (in this second profile public sector is the main market, innovation is produced through diversification and the innovative intensity is medium) -The low innovative/dominance of final users (this is the less innovative profile, its describes firms serving the final demand and characterised by process/rationalisation strategies) Chapter 10 and 11 are devoted to Knowledge-intensive business services (KIBS). KIBS can be defined as activities in which knowledge is both the input and the main output. These activities combine theoretical problems associated to two problematic fields of economic theory: service industries economics and information and knowledge economics. Before dealing with the role of KIBS, Pim den Hertog's chapter provides, in a managerial perspective, first a theoretical model of innovation in services and second a typology of service innovation patterns. The innovation model articulates four dimensions : new service concept, new interface, new delivery system and new technological options. This model allow to display several patterns of innovation : supplier dominated innovation, innovation within services, client-led innovation, innovation through services and paradigmatic innovations. But the main purpose of chapter 10 is the role of KIBS in innovation systems. Three different roles are distinguished : KIBS as facilitators (they support the client in the innovation process), KIBS as carriers (they transfer an innovation from a given place to a client), KIBS as source of innovation (they play a major role in developing innovation in client firms).