Knowledge Intensive Business Services (KIBS) are widely argued to be important actors in innovation systems. They are active both innovating themselves, and by providing their clients with important knowledge and learning opportunities. This study uses survey data to investigate the mechanisms of knowledge transfer and innovativeness improvement through the provision of KIBS. The empirical core of the paper is a set of Russian surveys of KIBS and their clients: KIBS are a fairly new phenomenon in Russia, so this provides an opportunity to contrast KIBS supplier-client relationships featuring more and less experienced customers. Many of the KIBS firms’ services are highly tailored to customer specificities, and we consider how far this is minor customisation and how far novel products (and thus potentially product innovations) are involved. These services typically involve KIBS consumers into a coproduction process, where both the formal supplier and the formal user of the service are engaged together in service production. Knowledge transfers through learning-by-doing in such cases affect customers' propensity to innovate and improve their absorptive capacity. The paper concludes that the generation of innovations through KIBS may well be a self-sustaining process. In this process, service providers are incentivised to engage in service innovations by more innovative customers’ demand for highly individualised services. In turn, the process stimulates the innovativeness of customers, as they engage in learning-by-doing through coproduction.
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