Integration between the machinery and equipment sector and KIBS: applying the subsystem approach

Abstract

This paper applies the subsystem approach to analyze the Machinery and Equipment (M&E) sector between 2000 and 2014, focusing on the use of knowledge-intensive business services (KIBS) as production inputs. The objective is twofold: to assess whether countries with higher market shares have intensified their integration of KIBS, and to understand recent transformations in the Brazilian M&E subsystem. The findings reveal that the M&E sector remains highly vertically integrated and only marginally linked to KIBS, with notable exceptions in the United States and Germany—where the incorporation of programming services has increased. In contrast, Brazil and China display persistently low levels of KIBS integration, raising concerns about technological upgrading and innovation capacity.