Knowledge Intensive Business Services, Knowledge Spillovers and Regional Growth. Sub-project 2: Tertiarisation and (Regional) Growth – Knowledge-intensive Business Services as Growth Drivers?

As part of a larger project on knowledge spillovers, knowledge-intensive business services and regional growth our study provides evidence on the relationship between tertiarisation and (regional) growth in Austria and the EU 27. In particular we test Baumol's presumption of a detrimental effect of structural change to services on productivity dynamics. We are able to reject this hypothesis for Austrian as well as European data and the period 1991–2012. In recent decades the shift to services was dominated by the rise of knowledge-intensive business services – a sector with high productivity, and a sector that contributes to productivity growth in other sectors via knowledge spillovers. Hence, in an econometric analysis on European NUTS-2 regions we find a positive correlation between structural change to knowledge-intensive business services and regional productivity growth, a result that we are able to reproduce also for tertiarisation proper. Our results argue for a policy that considers the change to (knowledge-intensive) services as an essential feature of modern economic dynamics, and that pays more attention to knowledge-intensive business services as a driver of knowledge spillovers and productivity dynamics.