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A Study on the Effect and Business Models of Industry Convergence between Manufacturing and Services

Author Lee, Donghee et al Date 2018.12.26 Page

Recently, it is urgently required to strengthen the competitiveness of Korean manufacturing industry and to upgrade the service industry. The convergence between manufacturing and service industries is attracting attention as a solution to this problem. Nevertheless, there is a lack of research on the level of convergence between Korea 's manufacturing and service industries and the extent to which such convergence brings about economic effects. In this context, the study quantitatively measures industry convergence and compares it across countries. In addition, the effect of convergence with services on the value-added production of individual industries including manufacturing has been analyzed from various angles. In addition, we analyze the current status and characteristics of business models and recent examples of convergence between products and services. The main research results are as follows. 


First, industry convergence between manufacturing and IT services or business services has been strengthened globally. In the meantime, the convergence rate between manufacturing and business services in Korea is relatively low, which is lower than in 2010. 


Second, convergence with the service industry has generally contributed positively to the production of individual industries. In particular, the convergence with IT service industry, which is a KIBS sub-sector, was the most effective in increasing overall industrial production.  


Third, the effects of convergence with the service industry on production depend on the type of industry and the type of national economy. In high-income countries, which are relatively service-oriented countries, the effect of convergence between high-tech manufacturing industry and service industry was greatly enhanced. However, in the manufacturing-oriented countries, the effect was significant in low-tech manufacturing industries. 


Fourth, IT service convergence has a positive effect on the manufacturing center, which has relatively low income level, such as Korea and Taiwan, especially in the high technology manufacturing industry. 


Fifth, the product servitization model depends on customer contact, technical level, value chain stage and combination type. The IoT-based convergence business is emerging in a wide variety of areas and is expected to expand further in the future.