One of the most evident facts in developed societies is the consolidation of service economies. With the passage of time, especially during the second half of the twentieth century, agriculture and manufacturing have been losing importance in terms of the composition of employment and in value added in favor of the tertiary sector. Economic growth has coincided with the process of outsourcing of economies, thus this structural change has been coupled with a growing interdependence between all productive activities.

In recent years, the service sector has experienced a boost due to certain factors such as the emergence of new technologies of information and communication (ICT) or the process of deregulation in some industries, and these have led to increased national and international competition and have encouraged the creation of companies in this sector. In addition, the strategies of some companies to outsource/off-shore tertiary activities have encouraged the development of business services and the internationalization of same. Thus, both production and consumption in advanced economies have been transferred from physical goods to services and, in particular, to those services related to information, converting this sector into a key driver for building competitiveness, employment and economic growth.

The service industry has become an important area of research in recent years. There are at least four reasons for the interest in this sector. Firstly, services account for an increasing share of output and employment in developed economies. Secondly, cross-border services are a key factor in reducing or even eliminating current account deficits in these economies. Thirdly, the business of providing services has grown dramatically in recent years within the general trend of economic globalization, making higher economic growth possible in those countries and regions that are participating in it. Finally, insufficient knowledge about the internationalization of the service sector justifies its study.

Among the various services, knowledge-intensive services (KIS), meaning those activities requiring a substantial base of human and technological capital, are increasingly regarded as crucial to the development of regional innovation systems [3] and to boost regional economic growth in industrialized countries. Along these lines, KIS act as users, creators and propagators of innovations, both technological and non-technological, playing a major role in the creation and dissemination of organizational, institutional and social knowledge, and generating positive externalities through the transfer and creation of useful innovations for other economic agents [4] [5] . Thus, the most recent theoretical and empirical analyses being carried out at an international level show that the various forms of feedback that result from knowledge-intensive services are among the causes of internationalization.

Some recent studies have shown how innovation rates are significantly higher in countries where there exists a wide range of advanced services compared to production. Furthermore, although it is possible to argue that technological advances like the Internet can help make up for deficiencies between regions, the fact is that, in most cases, international trade in advanced services is difficult given the need for face to face contact for the transmission of knowledge, and thus one of the most important ways that advanced services may be internationalized is by foreign direct investment.

Despite finding ourselves immersed in a global economy, innovation is in many ways an essentially regional phenomenon where services, especially those known as knowledge-intensive services, have acquired a central role through their ability to transmit knowledge, especially of the tacit type.

Given this context, this paper will try to understand the determinant factors in the internationalization of knowledge-intensive services in a peripheral region, Southern Spain. The paper is organized as follows: After this introduction, the second section will review the literature with regards to the internationalization of services, which has served as the basis for the empirical study, and the case of knowledge-intensive services will be alluded to. The third section is devoted to the methodology used, which is based on a survey of internationalized firms, and the fourth to the empirical study and results. The paper ends with some conclusions.

The chosen territory is Andalusia, a peripheral region located in Southern Spain. This area is characterized by a total population of 8,424,102 inhabitants as in 1 January 2011, representing 17.85 percent of the Spanish population. The level of GDP per capita in 2010 was 75.5 percent of the Spanish average, the second lowest of the 17 regions in the country [6] . However, expenditure on research and development compared to the regional GDP was 1.20 percent, the fourth highest after Madrid, the Basque Country and Catalonia. Regarding the process of internationalization, exports account for 10.05 percent of the Spanish total, while Andalusia’s contribution to Spain’s total foreign investment only amounts to 2.43 percent of the total, according to information from the Ministry of the Economy and Competitiveness [7] [8] .

The purpose of this section is to measure to what extent knowledge-intensive Andalusian companies have conducted their internationalization process according to the Eclectic Theory proposed by Dunning [1] [2] .

The traditional forms of internationalization of the company are: exports, direct investment and licensing of production to foreign firms. Dunning considers that for a company to become internationalized through these pathways it must meet certain conditions, which are presented in Table 1.

The firm must possess ownership advantages—from now on also known as specific advantages or competitive advantages—over its competitors in the foreign country and even with respect to its domestic competitors. These advantages are associated with the company’s intangible assets such as advanced technology, economies of scale, improved knowledge of marketing techniques and distribution… In order for the advantages to have an influence, they must remain exclusively in the company for a long enough period of time.

The company must have internalization advantages in order to be able to internationalize through exports or foreign direct investment. The first condition is not sufficient but it is necessary that the company has the desire and the capacity to internalize the particular advantage. This will be beneficial to the extent that it reduces market transaction costs.

If the company decides to invest in a particular country, it must offer location advantages over the country of origin. These advantages are not only associated with the costs and the availability of factors of production or the market, but also the particularities of the institutional system established in the country receiving the investment (tax system, labor regulations, degree of trade restriction, supranational integration areas, etc.).

These advantages are configured as the “OLI Paradigm” which links the decision to invest abroad to the characteristics of the company, the sector involved and the country that receives the investment. Each one of the concepts integrated into the “OLI Paradigm” includes different proposed theories about the causes that motivate foreign direct investment: 1) Specific or ownership advantages: Theory of industrial organization [9] -[15] ; 2) Advantages of internalization: Theory of transaction costs [16] -[29] ; 3) Advantages of location: Theory of location [30] -[37] .

These theoretical and empirical studies have been fundamentally focused on industry, while those studies looking at the tertiary sector have been rather scarce. However, in recent decades, with the rise of trade in services, studies on the sector have begun proliferating [38] -[43] , although the total number of studies is still limited. This justifies the continuing development of research on this sector in order to get a better understanding of the internationalization of services and, especially, knowledge-intensive services.

According to [44] and [45] , the Eclectic Theory [1] may be applicable to service companies. However, other researchers question such applicability [46] [47] and claim the need to develop new theories specifically for the internationalization of services [48] . Thus, there other recent approaches that are applicable to the services sector and, in particular, to knowledge-intensive services, which we refer to below. The network model of internationalization suggests that this transnational process is a function of relationships of the company with its business and social network [49] . They consider that the involvement of businesses in networks of cooperation provides access to resources, information, customers and ideas for products or services that turn out to be more important for the internationalization process that their specific advantages. For its part, The knowledge-based theory of the firm is based on the nature of the skills and knowledge of the company and suggests that the transfer of these across borders is more efficiently performed by wholly owned subsidiaries, arguing that companies are more efficient in said transfers than markets [50] . The focus of International Entrepreneurship seeks to explain the internationalization of companies that are born global or become international at a time close to their inception [51] and in which the entrepreneurs, their characteristics, personal goals and experience have a crucial impact on the development of the company. Finally, the Theory of resources and capabilities shows how competitive advantages are generated by a set of key resources of the company [52] -[54] and is based on the assumption that there exists a heterogeneity among companies that can lead to them having different results (see [55] ).

Source: Dunning, J.H. (1988, p. 28).

In this paper, based on the OLI Paradigm of Dunning [1] , we try to learn about some of the advantages of ownership and of location for knowledge-intensive companies located in a peripheral region (Andalusia, Spain), without making reference to the advantages of internalization. Some of the specific advantages are shown in the Table 2 and some of the advantages of location are specified in the Table 3.

Finally, it should be made clear that the economic literature has established services as activities different from goods, and that they have been characterized as being intangible, perishable, and their consumption usually occurs simultaneously with their production [56] etc. This last feature has tempered the ability to internationalize these activities to the extent that their production and consumption tend to occur not only at the same time, but also at the same place. In this way, the inseparability between producer and consumer has justified, traditionally, the existence of foreign direct investment as a method of international expansion of services in light of the impossibility of their being used for export. Thus, a priori, the form of internationalization of services is intimately linked to their own nature. Along these lines, there have been numerous studies that have tried to show the characteristics of different services and then tried to relate them with the forms of international supply [44] [57] -[66] . Recently, however, the emergence of new information technologies has allowed for the separation of the process of production and the consumption of services, which has encouraged exports in many of the activities in this sector that previously required the installation of an overseas branch.

The methodology used to learn some of the advantages of ownership and location of knowledge-intensive companies in Southern Spain is a survey of 256 service companies which carry out operations of internationalization (See Appendix). This survey is part of a wider one in which tourism enterprises have also been studied as a contraposition to the former by the type of traditional services that the latter represent.

The internationalization of knowledge intensive services in Andalusia has materialized mainly through exports, relegating to the background the opening of branch offices abroad, in line with what happens in this process in the whole regional economy. Meanwhile, other more recent forms of internationalization such as joint ventures, franchising… are virtually out of the picture. Thus we can say that this process is still in its infancy and that in the coming years it should tend to become more advanced. The major destinations of these companies are fundamentally the EU-15 followed by Latin America, then North Africa and finally Asia.

Within the knowledge intensive services, there exists a large concentration of industries in certain branches of activity in terms of participation in the process of internationalization. Five of the twenty-two branches considered represent over 50 percent of companies, the most important technical services being architectural and engineering; testing and technical analysis services, education, head office activities; activities of management consultancy, other professional, scientific and technical services, and real estate. With the exception of education, the rest are business services and some of which are construction-related companies, a sector in Spain and the region that is highly specialized and has great competitive advantages. Also, the economic crisis has forced many companies to look for new markets abroad.

With respect to the factors which have affected the process of internationalization, the companies report as most important in terms of the competitive advantages that they possess: the quality of service which they offer and the image that customers have of the company, training for employees (which is closely linked to the previous advantage), leadership and management ability, innovation, technology. These results are logical given the characteristics that these activities demonstrate. As well, higher productivity compared to their competitors and competitive pricing are highly valued by them. However, they do not consider company size or production costs to be important competitive advantages. We can therefore say that the competitive advantages of Andalusian companies in knowledge intensive services are based on professional and managerial skill, innovation and technology, which encourage productivity gains, and thus higher quality and better prices.

Companies in knowledge-intensive services that invest abroad value the ability to monitor their customers and customer proximity as the most important location factors. They also consider as particularly relevant the factors relating to the target market. Thus, growth, access to the domestic and other foreign market and market size are considered very important by them. This was expected given that most industrial companies investing abroad are likely seeking efficiency in order to sell in other countries, but in the case of services, the necessary proximity between the supplier and the consumer of the service makes the market a key factor in the strategy of internationalization. Thus, the allocation of resources and especially the low cost of labor does not seem to be a determining factor for these companies. In addition, factors related to the cultural context and the institutional factors are not valued so greatly. In short, we can say that these knowledge-intensive service companies are seeking markets more than resources and, with respect to the latter, are seeking more advanced rather than basic resources, which is consistent given the nature of this type of activity.

In brief, it can be said that although the level of internationalization of companies in knowledge-intensive services in this peripheral area is low based on the number of internationalized companies, those that have already begun the process, although incipient, seem to be exploiting correctly the specific advantages that they have, and those companies investing abroad, although in relatively small numbers, can continue to consolidating this process of accessing other countries to make full use of the advantages of location relating to the market.

This paper contributes to the literature about internationalization of services, in particular, about Knowledge Intensive-Services in several ways. Firstly, we identify the international entry mode of these types of firms. Secondly, we indicate some ownership advantages of internationalized firms (export and FDI) and location advantages according to the opinion of foreign investors. Thirdly, we have conducted an original large database of internationalized Knowledge Intensive-Services.

In this context, our paper provides some interesting findings to help entrepreneurs in relation to decision making of the process of internationalization and to the policy makers to establish corporate policy measures that contribute to improving the context in which firms have to develop their expansion in other countries.

Finally, we must make it clear that an extension of this research could be to extrapolate this work to different countries so that the differences that may exist between them can be seen. Similarly, another study could consist in analyzing the sequence of the internationalization of these activities and determine whether the different pathways, such as exports or foreign investment, are complementary, alternative or independent. Likewise, we can study if these firms have followed a gradual process [77] or have carried out a rapid internationalization according to Born Global New Theories [51] . This would allow us to different features between both types of internationalization processes and their consequences.

Authors acknowledge the financial support from the EXTENDA (Trade Promotion Agency of Andalucia), Spain.

1. Sector (CNAE 2009)

2. In which year was the firm created?

3. The firm is a part of a group?

¨ Yes ¨ No (go to question 5)

4. If the firm is a part of a group. Is the firm a headquarter of a subsidiary?

¨ A headquarter. In which country is the subsidiary/(ies) located?

If is located in Spain. In which region is it?

¨ A subsidiary. In which country is the headquarter located?

If is located in Spain. In which region is it?

5. How many employees does the firm have?

¨ Between 1 - 9 workers

¨ Between 10 - 49 workers

¨ Between 50 - 250 workers

¨ More than 250 workers

BLOCK 2: International Markets

6. What is the importance of the following way of internationalization?

7. What is the importance of the following channels on the international sales of the firm?

8. Reason for the presence in foreign countries.

9. Do you carry out Export activities regularly of its services?

¨ Yes. Since when?

¨ No

10. Total Turnover:

¨ Less than 2 milion euros

¨ Between 2 and 10 million euros

¨ Between 10 and 50 million euros

¨More than 50 million euros

11. What is the percentage of the firms sales destined to other countries?

12. To whom does the firm sell its services in foreign countries?

¨ Final consumer

¨ Other firms: ¨ Agriculture ¨ Industry ¨ Construction ¨ Services

13. Does the firm carry out imports from other countries?

¨ Yes ¨ No (go to question 14)

If so:

13.1 What services?

13.2 Who is the seller?

¨ A third firm

¨ A firm of the group

¨ Headquarter

¨ Subsidiary

13.3 Since when?

13.4 From which countries?

BLOCK 3: Competitive advantages

14. What is the importance of the following characteristics of the firm as competitive advantages in relation to the competitors in the host country?

BLOCK 4: Location advantages

15. Does the firm have subsidiaries in foreign countries?

¨ Yes ¨ No (go to Block 5)

15.1. In which country is the headquarter?

16. What is the importance of the following characteristics of the host country as determinant factors in the decision to sell or/and produce the service in this country (subsidiary)?

a) Availability of resources

b) Market characteristics

c) Institutional factors

d) Cultural context

e) Other

17. Cost of the investment in the foreign country

¨ Less than 2 millions euros

¨ Between 2 and 10 million euros

¨ Between 10 y 15 million euros

¨ More than 15 million euros

18. When did the firm locate in a foreign country?

19. The foreign subsidiary…

¨ Produces services

¨ Sells services

¨ Produces and sells services