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Analysis of the Dynamic Changes in and Effects of Service-IT Industry Convergence

Author Koh Daeyoung, Cho Hyunseung, Lee Donghee, Lee Jaeyoon Date 2016.12.27 Page
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A growing number of policy measures for promoting IT convergence in industries have been proposed recently, with particular emphasis on encouraging the use of IT in the service sector, which has long lagged behind the manufacturing sector in terms of both productivity and the application of IT. Despite the rising importance of service-IT industry convergence, little quantitative and empirical research has been done to determine the extent to which IT convergence has progressed so far, as well as in what manner it has progressed and with what effects on the service sector. The policy measures and legislative drafts that have been proposed so far thus tend to be quite abstract and generic in substance (Koh et al., 2014). 


While numerous attempts have been made to measure the progress of service-IT industry convergence and determine how IT convergence has affected the performance of the Korean economy, few have approached the matter from the perspective of industries. Moreover, very few studies have examined IT convergence over certain periods of time from dynamic perspectives, with fewer still having focused on the service sector.  


Motivated by the lack of research on these key questions, this study: (1) examines the dynamic changes occurring in various service industries that have adopted IT; (2) analyzes the economic effects of service-IT convergence; and (3) proposes measures for promoting further and more effective service-IT convergence.  


With a view to providing basic information and identifying implications for not only the service sector as a whole but also policymaking with the aim of promoting the convergence of IT with various service industries, this study specifically focuses on the following.  


2014, featuring a total of 101 industries, this study measures the degrees of convergence between 31 conventional service industries and four IT manufacturing and service industries, on both the supply and demand sides, and examines the dynamic changes that have been occurring in the process. The methodology formulated by Xing et al. (2011) is applied to measuring the degrees of industry convergence. 


Second, using a quantitative model based on a production function, this study measures and analyzes how the diverse IT-service industry indicators on the supply and demand sides have influenced the performance of service industries, including their output and labor productivity. 


Third, based on the analysis of the dynamic changes in service-IT industry convergence and the effects of such convergence on the performance of service industries, this study identifies and explains implications for the service sector as a whole and implications for increasing the effectiveness of policymaking aiming to promote service-IT industry convergence.