Business services, innovation and sectoral growth

By integrating different industry level data sources (OECD Input–Output Tables, OECD Structural Analysis Database and EUROSTAT CIS) for a selected number of European countries, this paper aims at assessing the economic impact of business services (BS) on client industries. Compared to previous research, the specific value added of this contribution consists of having taken into account both the strength and innovative content of the linkages between BS and user industries as well as to have looked at different mechanisms through which the use of BS inputs affects the performances of user industries. The results of the empirical analysis show that BS have a positive impact on the innovation performances of client industries and, via this channel, also on their sectoral value added growth. Moreover we find a positive effect of BS on the rate of growth of client industries that is not mediated by the introduction of new products and services.

► This paper provides empirical support on the positive impact that business services sector exert on the rest of the economy. ► We offer a tentative way of modelling the different mechanisms through which business services affect the performances of other sectors. ► We integrate different industry level data sources for a selected number of European countries. ► In order to study the composite nature of business services and on their multifaceted impact, a two-stage model is applied. ► The econometric estimates confirm that business services affect the growth performances of downstream industries.