Exports of knowledge-intensive business services: domestic market hypotheses and interactions with industrial capabilities

Abstract

The recent transformation of the service sector and the deindustrialization of most economies has increased support for an export-led development strategy of knowledge-intensive services (KIBS), bypassing the industrialization stage. However, the literature on deindustrialization suggests that early countries tend to develop non-dynamic services because KIBS are born out of demand for complex solutions by local industrial companies. The article theoretically examines this hypothesis from structuralist, evolutionist and Schumpeterian arguments. In addition, using macro-panel models with fixed effects, it estimates the relationship between domestic demand and the export capacity of KIBS. He finds that domestic demand is a relevant mechanism for building export capacities in KIBS, but it is only effective in countries that have reached advanced industrialization.

Date of presentation: 11-28-2022

Date of approval: 03-20-2023

JEL classification: O14, O33, L86, L60