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Establishment of Specialized Regional Cluster for the Promotion of Business Service Sector

Author Lee, Dong-hee Date 2014.03.20 Issue No 582

For economic growth and innovation, it is important to utilize business service(BS) which is input as an intermediate goods in accordance with the recent servitization of manufacturing industry. However, the competitiveness of domestic BS sector and support for its location policy are assessed to have been very insufficient compared to advanced countries.      


The domestic BS industry’s level of employment, value added and utilization of intermediate goods is extremely low compared to that of advanced countries. Not only that, external trade balance of the industry is running continuous deficit. 

Notably, agglomeration of knowledge-intensive business service(KIBS) is a factor having a huge effect on the growth and innovation of regional economy. However, there is an insufficient domestic institutional basis to reinvigorate the agglomeration.

This paper suggests the analysis of the current status of existing promising cluster location and its geographical distribution through the cluster mapping of specific sectors within the KIBS on the bases of 215 cities, counties and provinces.


Across the 37 cities, counties and provinces, the analysis confirmed 86 promising cluster locations for KIBS which are equipped with a certain level of specialization, agglomeration, size and growth potential, and among them, 68 were revealed to be located in the metropolitan areas.     


As the geographical distribution of promising cluster location are differentiated depending on individual regions and sectors. non- technology-based sectors such as specialized design and advertisement are concentrated mainly on Gangnam area while technology-based sectors such as R&D and engineering tend to be relatively located out of  Gangnam area or Seoul.  


The existence of promising location cluster for KIBS implies that a cluster development specialized for individual regions could be an effective means to foster industry and to this end, it is required of policy effort. 


It is necessary to take a differentiated policy approach to establish agglomeration and cluster mainly led by the KIBS sector specialized for individual regions.


It is critical to prepare legal and institutional bases to reinvigorate KIBS agglomeration and create cluster.


It is crucial to actively utilize the urban innovative industrial complexes and ease relevant regulations in order to facilitate the agglomeration KIBS in local cities.