Territorial Servitization: Theoretical Roots, Feasibility and Implications for the European Union

Abstract

Because of its potentially decisive role on regional development, the revitalization of manufacturing sectors has become a top priority for policy makers within the European Union. Recent scholarly contributions suggest that the interaction between manufactur-ing and knowledge-intensive business service (KIBS) businesses have the potential to generate positive outcomes, in terms of economic, employment and other social metrics in the focal territory. This process has been referred to as territorial servitization. The role of KIBS firms in promoting regional performance has been echoed by several su-pranational organizations and scientific studies; however, not all types of KIBS firms are equally important in facilitating regional manufacturing performance. This work focuses on two elements related to territorial servitization processes. First, I analyze how regional manufacturing characteristics—i.e., specialization and size of new manufacturers—and the entrepreneurial ecosystem—contextual factors driving entrepreneurial actions—impact the creation of knowledge-intensive business service (KIBS) businesses at the regional level. Second, I scrutinize the potential impact of dif-ferent types of KIBS businesses—distinguishing between technology-based (t-KIBS) and professional (p-KIBS) KIBS firms—on regional manufacturing productivity, meas-ured as the gross value added of manufacturing businesses divided by employment in manufacturing businesses. In the empirical analyses, I use a dataset of 121 regions located in 24 countries of the European Union. To account for the geographic embeddedness of the analyzed Europe-an regions, I employ spatial econometric methods. These methods allow to differentiate regional (local) and external effects (linked to adjacent territories), and to accurately test the proposed hypotheses. More concretely, I apply spatial Durbin cross-section models to quantify both spillover effects stemming from neighboring regions (diversity effects), and relationships between the dependent variable in the specific region and its adjacent regions. The spatial analysis of the 121 regions suggests that regions with a solid manufactur-ing base attract new KIBS firms; however, this effect is conditioned by the prevalence of a healthy regional entrepreneurial ecosystem. Additionally, the results show a posi-tive effect of KIBS sectors on the economic contribution of manufacturers; however, they reveal a stronger and positive relationship with the rate of technological KIBS businesses in the same region. The study offers valuable policy implications on how to implement policies that contribute to improve regional manufacturing performance.