The Rise of Knowledge Intensive Business Services (KIBS) in Asian emerging economies

• OBJECTIVES: Whilst economic geographers have been at the forefront of pointing to the importance of understanding the rise of services in emerging economies, and have argued that this the rapid increase in relocation of service activities from the developed western economies to Asia has initiated a “second global shift” (Bryson, 2007), the focus has to date largely been concerned with lower order service industries (e.g. work on offshoring, software, or customer services) rather than KIBS. The entry point of this paper is to argue that there is a substantial gap in current social scientific understanding, both empirical and theoretical, in relation to the nature of KIBS in emerging economies. This gap is reflected by the disconnect between the social science literature and recent policy and media commentaries which indicate both the presence and increasing sophistication of domestic KIBS industries within emerging economies. The paper therefore has three main goals: to question the veracity of this historical conceptualisation of KIBS in the global economy, to contest current understanding of the nature of KIBS within emerging economies and to argue furthermore that current theoretical approaches to understanding the nature and role of KIBS in the global economy are ill-equipped in relation to the current rapid rise of new KIBS activity in emerging economies. In relation to this last goal, we argue also from the perspective of economic geography that there is a lack of a conceptual, theoretical and empirical work related to the development of the spatial distribution pattern of the knowledge intensive business services (KIBS) in Asia. The literature on global economic development is yet to effectively deal with this issue in order to better understand and explain the nature of business service sector development in emerging economies below the aggregate level of trade and FDI (Daniels et al., 2012), and it is difficult to predict the future development trajectory (Noland et al., 2012). RESER – September 2015 164 METHODOLOGY: The paper builds on primary and secondary data on the development of the KIBS industry in mature and emerging markets. It involves data from the World Bank, Asian Development Bank, EU Commission as well as from industry associations in the respective markets. The primary data builds on interviews made with policy makers and company representatives at location in Asia and Europe. These interviews are constructing the base for a case discussion on how KIBS firms perceive the development in emerging markets but also in relation to their competitive situation in the home market. These insights can then be connected to the more general pattern that we can find in regional and international statistics. EXPECTED RESULTS: The service industry in Asia is to a larger extent internalized than in the west. The industry is also characterized by service bundling within both manufacturing and services in general. Manufacturing firms supply services to clients based on long term relationships and financial institutions provide funding as well as other services to clients. The geographical dynamics within the region are complex due to the high degree of regional production networks demanding the most varied types of services. The agglomeration effect within the KIBS appears to be strong in Asia. The rapid development of new economic centers in the region will impact on the location choice, competitiveness and internationalization of KIBS firms. This relates to both firms entering the region from mature economies, but more importantly regionally based firms. The economic geography of the KIBS industry is also highly dependent on the regulatory and policy environment. Current national policies aim at fostering capital regions and other larger cities as service or knowledge hubs. This development leads to competition between different cities and regions. However, to take full advantage of the economic potential within KIBS in Asia further integration of the markets is required. Research also points to the need of a continuous up-grading of the workforce within KIBS. A strong competence structure is a prerequisite in order to boost regional value-added activities. Domestic capacity building in Asia is based on different market structures, which may lead to a competitive challenge for current and future prospects of foreign service providers in the region. The continued growth path in East Asia to large extent hinges on further development of the service industry.

Ämnesord

SAMHÄLLSVETENSKAP  -- Social och ekonomisk geografi -- Ekonomisk geografi (hsv//swe)

SOCIAL SCIENCES  -- Social and Economic Geography -- Economic Geography (hsv//eng)

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Företagsekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Business Administration (hsv//eng)

Nyckelord

Service industry

emerging markets

globalization

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