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Purpose The purpose of this paper is to begin to develop a theoretical position for understanding the role of services in innovation in post‐industrial societies. Design/methodology/approach This study develops an evolutionary and institutional approach to understanding the role of certain specialist services in innovation and illustrate how significant they are for the economies of large metropolitan areas in England and Germany. Findings The paper argues that the role of knowledge intensive business services (KIBS) in innovation may be understood theoretically in terms of evolutionary and institutional economics. From this perspective is is argued that urban economies are path dependent interactive learning systems that develop individually through time. They are increasingly characterized by networked production systems in which KIBS play a key role in the transfer of bespoke knowledge between actors both within and from outside individual cities. As a result the authors argue that KIBS make a significant and place specific contribution to innovation in the cities where they are located. Originality/value The paper suggests a systematic theoretical approach to understanding the currently under‐theorized role of services in general and KIBS in particular in innovation. It also points to the importance of the geography of specialized services.
Simmie et al. (Fri,) studied this question.