Sustainability Development of Knowledge-Intensive Business Services: Strategic Actions and Business Performance

sustainability Article Sustainability Development of Knowledge-Intensive Business Services: Strategic Actions and Business Performance Veronika Bumberováand František Milichovský* Faculty of Business and Management, Brno University of Technology, CZ-61200 Brno, Czech Republic; [email protected].cz *Correspondence: [email protected].cz; Tel.: +420-54-114-3782 Received: 2 July 2019; Accepted: 16 September 2019; Published: 19 September 2019   Abstract: The recognition of the relevance of knowledge-intensive business services (KIBS) is becoming especially acute in the European Union and even more important for many emerging economies. The objective of the present study is twofold: (1) to examine whether an empirically-based typology of sustainability development can be constructed for KIBS; (2) to identify whether different development patterns are associated with different business performance outcomes. The empirical evidence is based on quantitative and firm-level data gathered through an email questionnaire which yielded 128 qualified responses from KIBS in the Czech Republic. The analysis is based on exploratory factor and cluster analysis to identify the cluster membership and to assess the relationship with performance outcomes it has been used the parametric test one-way ANOVA. Data analysis revealed that three distinct patterns types of KIBS exist, which were associated with different performance outcomes. With regard to the level of sustainable development, we found the conservative KIBS following market extension through a repositioning of existing and revised services, innovating KIBS following a new service development strategy focusing mainly on complements or line extension to existing services based on changes in technology and middle-ranged KIBS focusing on traditional strategy of comprehensiveness of services or “more services under one roof”. Innovating KIBS outperform other types of KIBS in all financial and non-financial parameters. The results have implications for practices involved in strategy development in services and useful for government efforts. The limitation of the research is done by focus on small companies, operating mainly in ICT and architectural and engineering services. Keywords: sustainable development; strategy type; knowledge-intensive business services (KIBS), business performance; sustainable performance; patterns of behavior; Czech Republic 1. Introduction Services are increasingly becoming the dominant activities in developed economies and their growth is not independent, but rather is closely linked to the other sectors of the economy [ 1 ]. The growing importance and focus on the services sector research is the result of significant manifestations of the current structural changes of the economically developed countries, which have been noted particularly over the past twenty years. In services, around 70% of added value is currently being generated in OECD countries, and the trend of this share continues to grow. It is not surprising that a majority of sustainability-related studies were conducted in a developed country context, global business organizations must promote research on sustainability assessment issues in the developing countries [ 2 ]. It is well known, that the knowledge-intensive business services (KIBS) as a small proportion of all services, is significant in terms of economic benefits and as the key part of Sustainability 2019,11, 5136; doi:10.3390/su11185136 www.mdpi.com/journal/sustainability Sustainability 2019,11, 5136 2 of 19 the growth in value-added, employment and labor productivity [ 3 ]. It also represents one of the major segments that is a facilitator of knowledge, external information, and an innovation facilitator for other client businesses [4]. The results clearly show that KIBS are very heterogeneous and there is great need to deepen our understanding of the types of business development they undertake [ 5 – 10 ]. The empirical studies in present days represent an attempt to investigate patterns, scenarios or modes of competitive, cognitive and innovation activities. For example, Corrocher et al. [ 6 ] explored the KIBS’ ‘black box’ located in Italy, investigating sectoral variety and common patterns across different typologies, as well as heterogeneity, is driven by a firm and market-specific characteristics. The authors’ results suggest, that there are four profiles of KIBS: interactive innovation mode, product innovation mode, conservative innovation mode, and techno-organizational innovation mode and each cluster membership was associated with strategy adoption as the most significant determinant. Miles, et al. [ 11 ] found six clusters of KIBS located in an emerging economy such as Russia: Non-innovators; organizational change innovators; marketing innovators; technology-oriented innovators; non-technological innovators and diversified innovators and distribution of companies across the clusters in terms of their size and the type of services. Evidence from developed countries has outlines the positive effects of KIBS on sustainable development of the economy [ 12 – 15 ]. The recognition of the relevance of KIBS firms is becoming especially acute in the European Union and even more important for many emerging economies [ 11 , 16 ]. The Czech Republic is a small post-communist regime country located in Central Europe with rather short distances, good accessibility, an extremely strong economic position of the capital city Prague and a significant portion of manufacturing and R&D business employment located in non-metropolitan regions (Ženka et al. [ 17 ]). Considering the relatively small size of the Czech economy, the strong position of manufacturing industries and the lower share of KIBS in total employment [ 18 ]. The Czech Republic is in a situation where the main driver of the economy is industrial specialization, which is also linked to many commercial services. So far, less important in the domestic economy know intensive services. Employment of the Czech population in knowledge industries services grew at a faster rate (1.3%) in 2008–2017 compared to the EU-28 (0.9%), although convergence is only very slow. In the EU, knowledge-based industries make up 40% of total employment on average and 33% in the Czech Republic (2017 data). One of the positive examples of KIBS in the Czech Republic is IT and software services, where the importance in the economy and export performance is increasing. The export potential also shows architectural and engineering activities and creative sector such as design. However, the KIBS sector created less than 17% of the value-added of SMEs, compared to almost 22% in Europe [ 19 ]. The successful development of KIBS companies can be seen as a prerequisite for further sustainable development of the Czech economy in terms of increasing the value of exports and improving the position in global value chains. Looking at this issue from situational or contingency theory perspective, one could surmise that the business performance is the output of alignment with the service, process innovation based on technology domain, market strategy and organizational changes of each KIBS, giving rise to the following empirical research questions: (1) Is it possible to divide KIBS by the features of strategic actions and subsequent organizational changes into homogeneous areas? (2) Are there dependencies between perceived strategic actions and business performance of KIBS? (3) Which of the development activities contribute to considerable differences among business performance? Drawing on a survey-based firm-level dataset, the aim of this paper is to test whether: (1) to examine whether an empirically-based typology of sustainability development can be constructed for KIBS; (2) to identify whether different development patterns are associated with different business performance outcomes, evaluating the heterogeneity driven by KIBS. The results could be useful for managers and owners in this sector and government efforts to support the development activities of Sustainability 2019,11, 5136 3 of 19 these companies. The next sections introduce the theoretical framework with the focus on KIBS sector and subsequent methodology provides the details of data collection and analytical methods, the fourth section presents the findings of the analyses and final section summarizes the conclusions of study results. The aim of this study is evaluating the heterogeneity driven by KIBS. Defining of Knowledge-Intensive Business Services (KIBS) There are different approaches to defining KIBS (see e.g., [ 9 , 20 ]). Generally, this sector is characterized by the private sector of small enterprises with a high level of knowledge and orientation of its services to other organizations (private and public sector) that are predominantly non-routine [ 20 ]. Over the last decade, the economic and business literature has been largely discussing competitive strategies and innovation patterns in KIBS, both from a theoretical perspective and, to a lesser extent, from an empirical point of view [ 6 ]. The empirical studies perform analyses and comparisons based on micro-level data from Community Innovation Survey (CIS), nomenclature classification (NACE) or on the prior distinction between professional KIBS (p-KIBS: business and management services, legal and accounting activities, market research, etc.) and technical KIBS (t-KIBS: IT related services, engineering, R&D consulting, etc.) as firstly proposed by [9]. In particular, it has been observed that traditional industrial classifications and economic nomenclatures, mainly based on the character of the goods and services produced, and on inputs, processes and technology of production—like for example those which refer to the NACE classification used in the European Community, can be inadequate when not misleading to differentiate the various types of firms that form the KIBS sector [8]. 2. The Research Framework of Sustainable Development of KIBS In this paper, we define sustainable development using the dominant definition established by the World Commission on Environment and Development (WCED), published by [ 2 ]: “Sustainable development means meeting the needs of the present without compromising the ability of future generations to meet their own needs. This definition means that firms engaged in sustainability need to seek strategies that simultaneously create economic value. Thesustainabledevelopmentintermsoflong-termgrowthandsurvivalisdrivenbydifferentiation, its ability to provide unique and superior value in terms of quality, services, and special features or after-sales service. Therefore, research has begun to test whether strategic and other features configurations of actions and practices have a different impact on firm results [ 5 , 6 , 12 – 15 ]. The works by Tether [ 7 ] and Freel [ 3 ] provide important steps in the direction of exploring differences across KIBS. It seems that heterogeneity of KIBS sector concerns not many factors as the size of companies, or the kind of services provided, but rather strategy adopted, cognitive aspects of knowledge features [8]. These issues are defined by Scheuing and Johnson [ 21 ] according to Ansoff’s product-market expansion matrix who identified four different development strategies for services that can be pursued using four different types ranging from new service/markets, through new service lines and service line extensions, to service improvements. However, the service/market development strategies should be supported by innovations and changes in organizing internal resources. Figure 1shows the research framework of sustainable development of KIBS in this study. In the middle is the alignment, which is based on the premise that simultaneously, many contingencies are embedded in the research model [ 22 ]. The goal is trying to find clusters of variables that collectively define a meaningful and coherent slice of organizational reality [ 23 ]. All individual determinants are described in the next sections. Sustainability 2019,11, 5136 4 of 19 Figure 1. The research framework of sustainable development of KIBS. 2.1. Product (Service) and Process Innovation The competitive advantage of KIBS firms primarily relies on the development, adaptation, and commercialization of knowledge-based services, product innovation plays a crucial role in KIBS’ operations [ 24 , 25 ]. The new product development (NPD) literature classifies innovation into different typesandcapturestheintensityoffirms’innovationeffortswithinatechnologicaldomain. Theemphasis on innovation in services is often placed on continuity rather than newness Voss et al., [26] . One of the key criteria which have been used as the basis for establishing the typologies is the degree of the radicalness of innovation. Avlonitis et al. [ 27 ] offer a typology which classifies service innovation into six different types: new to-the-market services, new-to-the-company services, new delivery processes, service modifications, service line extensions, and service repositioning. Product and other innovations can give the company a competitive advantage to the extent that the technology underlying such innovations remains proprietary [ 27 ]. Lafuente et al. [ 24 ] are using commonly used scale proposed in the Oslo Manual for evaluating service innovations: (1) replacement of products being phased out; (2) extension of product range within main product field through technologically new products; (3) extension of product range within main product field through technologically improved products; and (4) extension of product range outside main product field. Others like [ 27 – 29 ] are using traditional data (e.g., CIS) with rather dichotomous (1-new or significant improved services, otherwise 0) variables. Product innovations are developed to meet or outstand the offerings of the company’s competitors. Avlonitis et al. [ 27 ], suggest that this group of services is developed to meet or outstand the offerings of the company’s competitors. Further, the KIBS implemented product (service) innovation is associated with how services are provided and organized, and in turn, affects the relation with users in terms of customer satisfaction [6]. Rodriguez and Camacho [ 30 ] and Miles et al. [ 11 ], identified technology, as a factor reflecting companies’ orientation towards product innovation. According to Corrocher et al. [ 6 ] is technology adoption non-interactive source of knowledge explained by the (ICT) technologies used in service production/delivery process. The development of technology has implications, which concerns with the modes and timing of production and delivery of some types of services much more possible and easier. This process can introduce some distance between service development and utilization. It could create the geographical reach of KIBS and, accordingly, the perception of increasing international pressure on local firms [ 6 ]. This group of variables characterizes firms that are at the frontier in terms of adoption and use of new technologies but that are also likely to rely upon external drivers of innovation, such as specialized suppliers of tangible technological inputs. Technology development emphasizes the newness of the service’s operating/delivery process (i.e., hardware, software) to the company, the technological newness of the service’s delivery process Sustainability 2019,11, 5136 5 of 19 and its subsequent newness to the customer, and the newness of the new service development and marketing process to the company [ 29 ]. However, KIBS firms specializing in a service like law or engineering may introduce a completely new service and many of them have developed consultancy offerings—without the use of any new technologies [ 11 ]. While professional KIBS are more keen to adopt new technologies, technical KIBS are more focused on moulding them [ 6 ]. This theoretical evidence suggests that technology development reflecting companies’ orientation towards product innovation and improvement of service’s operating/delivery process [ 6 , 30 ]. This theoretical evidence suggests that KIBS as a sector is conducive to greater service innovation level based on changes in technology. 2.2. Marketspace Even established KIBS are on the lookout for new opportunities emerging in new markets to ensure future development in terms of growth and survival. Furthermore, being able to offer new or existing services or processes may improve a company’s positioning in existing markets [ 31 ]. Market development strategies reflect the breadth of the geographic markets served and the firm’s pursuit of new distribution channels [ 32 ] so they are closely interlinked with marketing actions. Branzei and Vertinsky [ 32 ] suggest that high-growth firms are twice as likely as low-growth firms to research and enter new markets. They found, that more intense market development strategies constrained exploitation while an increased focus on existing niches fostered the commercialization of incremental innovations. KIBS targeting to specific niche markets can offer distinct advantages and can avoid having to compete solely on cost against larger enterprises with greater economies of scale and deliver high-quality products, they can thrive in small volumes with high margins. However, the service innovations (especially more radical) which are untested and bringing into the new markets are a very risky strategy Rodr í guez and Nieto [ 33 ]. As a result of the interaction between service providers and their customers, some innovation activities are aimed at adapting the services to the users ´ needs, which might in itself be considered a form of innovation Rodr í guez and Nieto [ 33 ] which is often under the protection of the contract between the service provider and the customer. This may be a barrier to distributing and delivering service innovation to foreign markets as well. 2.3. Marketing Actions Marketing development strategy involving significant changes in design, placement, promotion or pricing activities [ 34 ]. This strategy leads to tactical marketing actions such as changes in sales or distribution methods, advertising or permanent exhibitions. The objective is to increase the appeal for the firms’ products in terms of market penetration and/or to enter new markets [6]. These actions focus on customer’s needs, opening new markets, or repositioning a company’s product with the intent to increase sales. Marketing strategies affect financial outcomes for small businesses and lead to the sustainable development of these companies. An effective marketing strategy increased sales and dominance in a targeted market [ 35 ]. KIBS managers/owners are tasked with using various communication levels to determine which consumer populations are most likely to talk about a company brand to help influence quantifiable ways to sales and profitability [36]. KIBS can use marketing communications to obtain information and advice, offer information about products, and persuade target customers on the merits of a particular product [ 37 ]. Product presentation is a very important marketing tool in terms of penetration or entering new markets and help to promote brands. Building a valuable brand increases customer value perception, gives the product a higher quality level, increases profitability [ 38 ] and lead to the sustainable development of these companies. Companies that have a strong brand name achieve better performance and marketing capabilities [ 39 ]. The KIBS focusing on marketing actions are likely to have a better ability to increase customer satisfaction, also to successfully adapt to changing market needs, to discover and Sustainability 2019,11, 5136 6 of 19 exploit business opportunities and to access new information and resources in order to develop new competitive products or processes [6,34]. 2.4. Human Resources and Organizational Structure A specific feature of KIBS, which affects the development activities, is their labor-intensive nature. It is especially in KIBS that highly qualified human capital represents a key strategic asset. Corrocher et al. [6] talking about the organizational changes and non-technological innovations, which is explained by human capital competencies and organizational structure, and reflects an innovative pattern which is oriented towards changing organizational variables such as the firm internal structure and personnel skills and profiles. Perhaps, one of the best arguments for sustainable development of SMEs is the potential to attract and retain employees [ 40 , 41 ]. Development of human resource management is a critical innovation strategy, particularly for high-tech or knowledge-intensive firms and consistently enables superior performance. Human development strategies reflected the strategic importance placed on recruiting knowledgeable employees, training existing employees, and developing functionally diverse teams [ 32 ]. Investments in human resources appear to increase, rather than decrease, with the introduction of product innovation and ICT, following the need for firms to improve their knowledge capacity [ 6 ]. Implementation more complex technology will increase the need for intensive learning. 2.5. Business Performance of Services The impact of strategic and mainly innovation activities on the business performance of services is less directly observable compared to manufacturing [ 27 , 42 ]. In other words, because there is no physical product, it is often harder to convey the immediate benefit to consumers and any benefit may not be immediately linked by the customer to an innovation per se [ 42 ]. An increasing number of researchers have turned their attention to a specific aspect of the non-financial performance of service firms [ 29 ]. Effectiveness assessment of any strategy and its impact on the overall firm is an important issue that all firms need to assess after the implementation of any new strategy [ 2 ]. When measuring SMEs performance, the subjective sources of financial and non-financial performance are more useful [43]. All the mentioned strategic actions in terms of innovations and changes in selected areas of theoretical background have an impact on business performance. Researchers use many indicators, such as financial (turnover, sales, ROA, etc.) and non-financial (market share, customer satisfaction, image, etc.) using objective and/or subjective scales [ 2 , 27 , 42 ]. Many researchers (e.g., [ 27 , 42 ]) suggest that the service innovations have a positive relationship on firm (financial, non-financial) performance (depend on radicalness). According to Avlonitis et al. [ 27 ], service line extensions are concerned with non-financial performance, particularly the company’s overall image. Having developed a good image in the eyes of the customer helps minimize the risk associated with the new offering and emphasizes its ability to (also) offer a particular service or its ability to offer improved services. Delivery processes have the most important contribution in terms of financial performance, particularly the profitability level. This type of action aims to take advantage of modern technologies in the delivery of the service and, thus, renders the delivery more cost-efficient and therefore, profitable. Service repositioning is merely an effort to shift the market’s overall perception of the company’s services relative to that of competitors. Further, Georgiadis, and Pitelis [ 44 ] find that more profitable services (SMEs) combine a highly skilled workforce with technological and know-how-based firm differentiation strategies, and/or product differentiation strategies, which are based on the quality of service and personal attention to customers, alongside generous compensation and attention to employee development. Thus, we hypothesize: Hypothesis 1 (H1). KIBS implemented more radical service (new to the market or firm) innovations have an association with non-financial performance, particularly company overall image. Sustainability 2019,11, 5136 7 of 19 Hypothesis 2 (H2). KIBS implemented marketing actions have an association with increasing customer satisfaction and flexibility to adjust to the changeable needs of the customers. Hypothesis 3 (H3). KIBS implemented technology to introduce new or to improve existing delivery processes, have a close association with financial performance (profitability level). Hypothesis 4 (H4). KIBS implemented changes focused on human resource management have a closed association with improvement of quality service offered. The firms often make decisions resulting in strategic configurations of one or several development actions. As Amara, Landry, and Doloreux [ 29 ] pointed out, there are strong complementarities between different types of innovations in services. From a system point of view, any action or change and innovation involves the development of other forms of actions in the system, organization. Hence, the introduction of new services often requires the introduction of new service processes, the adoption of new organizational practices, the availability of changes in service design, promotion and placement and so on [ 28 ]. Instead of exhibiting complementarities, the different forms of innovation might be independent of each other or even show substitution effects [29]. There is general agreement that KIBS sector have the highest mean score in innovation level within service industry as a whole and are expected to adopt a broad, complex portfolio of innovation initiatives [ 28 , 30 ]. Implementation of one of the four types of innovations and changes represents a simple strategy and any of their combinations a complex strategy [ 28 ]. The importance of the hybrid cluster is mentioned in the work of [ 15 , 28 , 45 , 46 ]. Coordination of innovation decisions can result in complex strategies. According to Martin-Rios et al., [ 28 ] a complex strategy is formed, for example, by combining one or more technology-derived innovations (product and process) and non-technological innovations (organizational and marketing). There is an expectation that internal variability of innovation types will lead to differences in the generation of organizational results. Service firms adopting complex innovation strategies could obtain high rates of firm turnover and alternatively, simple strategies could be associated with lower firm turnover rates [ 28 ]. However, even within the KIBS sector have been found differences and not all businesses are active innovators [ 11 , 27 , 47 ]. Thistype of non-innovatory KIBS probably rely upon established reputation and/or economic upturn in terms of growing customer demand to compete in the current market [ 6 ]. This cluster of conservative KIBS have been identified throughout European studies and studies from emerging economies (see [6,48]). In light of the above conclusions, we hypothesize: Hypothesis 5 (H5). The group of least or non-innovative KIBS are less successful in terms of both, financial and non-financial performance compared to the other type of KIBS. Hypothesis 6 (H6). KIBS implemented more complex innovation strategy are more successful in terms of financial performance, particularly profit. 3. Data, Variables Definitions, and Methods 3.1. Data Drawing on the survey-based firm-level dataset, the aim of the paper is to test whether different types of KIBS could be associated with different development patterns and performance outcomes, evaluating the heterogeneity driven by KIBS. The empirical evidence is based on quantitative data through an email questionnaire from July to September 2017. The basic population gathered from university database Amadeus after selection criteria (headquarters in the Czech Republic, only private profit sector; services operating more than 5 years, should not be a presumption of bankruptcy or insolvency; the size determined by the total number of employees is 10–49; owner should be a senior Sustainability 2019,11, 5136 8 of 19 executive (CEO) and must be in the top management and has majority share 50.1%) included 1214 companies, operating in knowledge-intensive business service sector. The total return rate from the survey was 128 valid answers in completely and correctly filled form (return 10.5%). The resulting sample of respondents copies the theoretical database file structure (see Table 1). Table 1. KIBS classification of industrial activities according to CZ-NACE Rev. 2. Theoretical Freq. Research Freq. KIBS * Absolute Relative Absolute Relative Section J 62 300 24.71% 37 28.91% t 63 21 1.73% 3 2.34% t Section M 69 214 17.63% 19 14.84% p 70 64 5.27% 7 5.47% p 71 407 33.53% 40 31.25% t 72 17 1.40% 4 3.13% t 73 123 10.13% 11 8.59% p 74 68 5.60% 7 5.47% p Total 1214 100% 128 100% * t—high technological knowledge; p—professional services. Looking at the geographic distribution, more than 60% of small KIBS in a sample are situated in the three, economically most important (metropolitan) regions in the Czech Republic. It means, 30.50% of KIBS is situated in the metropolitan region of Prague city, 22.70% are situated in South Moravian Region with the capital city of Brno and 8,7% are situated in Moravia-Silesia Region with the capital city of Ostrava (see next Figure 2). The rest of KIBS (40%) are situated in non-metropolitan regions. This is not a surprising result and it is consistent with the research results of authors Ženka et al. [ 17 ]. They found that KIBS in the Czech Republic is strongly spatially distributed according to the city size and employment potential. Figure 2. Geographic distribution of the sampled business. Sustainability 2019,11, 5136 9 of 19 3.2. Variables Definition 3.2.1. Service-Market Development Strategies Due to the continuous nature of product (service) innovation activities in services [ 5 ], rather use dichotomous yes/no response, we adopted existing ordinal scales [ 6 , 24 , 27 ]. The variable used to measure the service innovations is predominantly based on the scale proposed by Avlonitis et al. [ 27 ]: (1) the service was totally new to the company, (2) the service supplemented an existing company line, (3) the service created a new product line for the company, (4) the service was totally new to the market, (5) the service offered new features towards competition, (6) the service was in response to changing customer purchasing behavior, (7) the service was a modification of existing services, (8) the service was a revision of existing services. This typology reflects a continuum of the range of innovation from discontinuous (radical) innovation to continuous (incremental) innovation. Using a five-point scale (1: Strongly disagree, 5: Strongly agree), respondents were asked to indicate their degree of agreement with each service innovation items/statements implemented in the last five years. Market development strategies indicated the strategic importance of market creation or expansion [ 32 ]. Respondents were asked to indicate their degree of agreement of four strategic objectives: (1) existing service targeted into new markets, (2) the company entered a new market for the first time, (3) the company extended the current market, (4) the searching for niche or specialized markets. Using a five-point scale (1: Strongly disagree, 5: Strongly agree), respondents were asked to indicate their degree of agreement with each market development items/statements implemented in the last five years. 3.2.2. Organizational Changes Technology adoption explained by the ICT technologies is used predominantly with product (service) innovation, particularly delivery/operational processes [ 6 , 27 , 29 ]. Because empirical results suggest, that not all KIBS may introduce service innovations with the use of any (new or significantly improvement) technologies [ 11 , 49 ], we decided to take the technology variable as a separate item. We incorporated the technology adoption items such as software, hardware, and other ICT technology. These items were constructed on Likert-scale measure (1: Strongly disagree, 5: Strongly agree). Marketing actions involving significant changes in design, placement, promotion, pricing activities [ 34 ]. We incorporated six items: (1) change in the current customer segments (2) change in company and product presentation, (3) introduction of a new distribution channels, (4) introduction of a new pricing policy of service offered, (5) change in communication with customers, (6) change in brand of services offered. Using a five-point scale, respondents were asked to indicate their degree of agreement with each service innovativeness items/statements (1: Strongly disagree, 5: Strongly agree). Human development strategies reflected the strategic importance placed on recruiting knowledgeable employees, training existing employees, and developing functionally diverse teams [ 32 ]. However, we incorporated changes associate with HRM system: (1) change in the overall HRM system, (2) change in leadership style, (3) change in goal setting, (4) change in the reward and motivation system, (5) change in education and training system, (6) change in carrier growth and development of staff, (7) change in staffstraining and satisfaction, (8) change in work flexibility, (9) work-load changes, (10) attract and retain new knowledge employees, (11) developing functionally diverse teams. All these items were constructed as the mean of questions on Likert-scale measure (1: Strongly disagree, 5: Strongly agree). Driving on strategic change literature, changes in organizational structure include: (1) change in ownership, (2) change in decentralization level, (3) change in a functional area, department, or division, (4) change in managing staffnumber, (5) change of operational-level staffnumber, (6) change in step count in operation processes. All these items were constructed as the mean of questions on Likert-scale measure (1: Strongly disagree, 5: Strongly agree). Sustainability 2019,11, 5136 16 of 19 create a stronger position to the market. One possible explanation may be that the more radical service innovations, which are untested and bringing into the new markets are a very risky strategy [ 33 ]. Some innovation activities are aimed at innovations are created in adapting the services to the users’ needs, which might in itself be considered a form of innovation, which is often under the protection of the contract between the service provider and the customer. This may be a barrier to distributing and delivering service innovation to foreign markets as well. The new or improved delivery process efforts exist in all type of analyzed KIBS. User participation in the process of production and delivery, often overlapping with consumption itself, generally, the most debated and distinguishing characteristic of services and appears all the more relevant in the case of knowledge-intensive services [ 6 ]. There exists a tension between the pressure to reduce the production costs of services, which leads firms to look for increasing standardization, and the need to meet specific user requirements, which, on the contrary, force firms to seek a high degree of customization in their products. Most of KIBS firms have both science and engineering and other graduates on their payrolls. Some firms are highly specialized, while others that are nominally in the same sector are much more broadly focused [ 50 ]. It is therefore very surprising to find that the knowledge capital embodied in the human resources of small KIBS in the Czech Republic has not undergone more pronounced changes in the last five years. This is a similar result with Corrocher et al. [ 6 ], who found a rather conservative attitude of KIBS not inclined to hire new personnel and more stimulated human resources to engage in training programs to update their competencies with focusing on product innovation. Finally, this study suggests that the most innovative KIBS make the strongest contribution to non-financial performance, i.e., company image, building customer satisfaction, increasing quality of services and so on. Although this conclusion is somehow tentative, as its deeper investigation was beyond the scope of this study, it provides the management of companies in the service sector with an initial basis for achieving a match between financial performance objectives and new services development strategy. 6.1. Practical Implications Apart from academic use, the classification and positioning of the growing number of studies in this field will help practitioners develop a comprehensive understanding of the strategic importance of sustainability issues in different ways [ 2 , 51 , 52 ]. At a public policy level, the results of this study give ideas for encouraging strategy development of KIBS. This study suggests, that there is a different development scenario within the KIBS sector. It should be acknowledged that small enterprises comprise several divergent target groups, and the diversity of development patterns suggests that diversity should also direct the policies aiming at supporting development in these small enterprises (e.g., Mol, Brandl [ 53 ] or Desmarchelier, Djellal, Gallouj [ 54 ]). Based on the evidence of this study, the smallest companies operating under sector “KIBS” do not develop radical innovations and it is necessary to make greater efforts to foster the development of incremental innovations. Asecond contribution for practitioners lies intherelationshipbetweenthedegreeof innovativeness of the new service and its performance. That is, the least innovative new services (revision or repositioning existing services) are relatively less successful in terms of financial performance compared to the moderately innovative types of new delivery processes and service line extension. 6.2. Limitations and Further Research Further in-depth research is required with control variables such as age of company or localization characteristics. We also didn’t incorporate other important dimensions of development activities such as relational or network activities as a part of learning and knowledge process as well as other organizational innovations (see [ 6 , 11 ]). External relationship development and innovations, the establishment of relationships with partners and a subset of organizational innovation, has been developed especially for services [ 47 ]. Service firms are more likely to engage in collaborations with Sustainability 2019,11, 5136 17 of 19 customers and suppliers as part of their innovation process [ 7 ]. Customers, suppliers, and competitors are major sources, while partners such as franchises or professional associations are another [ 11 ]. Customer and supplier relationship development allows SMEs to maximize the use of their limited resources [ 4 , 55 ]. Developing such partnerships can provide them with opportunities to acquire new skills and improve existing ones. This also allows them to pursue cooperative joint ventures as a means of sharing the risk [50,56]. The research carried out on a sample that is rather small in size or the range corresponding to the lower limit of usability of some suitable tools. From this point of view, the theoretical possibility is to be increased by another KIBS category sample research or at least to obtain a uniform representation of each of the sections, which was distorted by the representation of the two largest sample groups (ICT and architectural and engineering services) to validate the results. All obtained results could not be generalized to wider population of KIBS companies in the Czech Republic. The study has been conducted in a specific national context of the Czech Republic. It would be interesting to extend the analysis to other countries to identify the patterns of KIBS which are either country-specific or generalizable. Author Contributions: All authors contributed equally to this paper. Funding: This research received no external funding. Conflicts of Interest: The authors declare no conflict of interest. References 1. Miozzo, M.; Soete, L. Internationalization of services: A technological perspective. Technol. Forecast. Soc. 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In Exploring Knowledge-Intensive Business Services; Palgrave Macmillan: London, UK, 2012. © 2019 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).