Peculiarities of public sector clients in service innovations

This paper analyses knowledge-intensive business service firms and their innovation activities in the context of federal government procurement with empirical evidence from Swiss information technology firms. The paper contributes to the growing literature on knowledge-intensive business services by expanding the concept to also capture public sector clients. It focuses in particular on the ways in which having a public sector client influences a knowledge-intensive business service firm’s ability to innovate, opportunities for interactive learning with their clients, and ways in which having a public sector client allows a firm to diversify. The paper shows that having a federal agency as a client is quite different from a private sector client particularly with regard to multi-party systems on the client side, the importance of informal interactions, and the role of public reputation.