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Business services in regional economies: exploring the co-evolution of supply, demand, and sectoral interactions

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  • Borje Johansson

    (Jonkoping University)

  • Johan Klaesson

    (Jonkoping University)

Abstract

The aim of this paper is to demonstrate how economic growth stimulates business-service providers to develop new service varieties, which, in turn, enhance the productivity of business-service buyers. This creates a coevolutionary process where service suppliers and customers interact, leading to an increase in the number of differentiated service offerings. We introduce a framework for local economies, wherein business-service sectors evolve in response to local demand potential, while non-business-service sectors grow based on each economy’s supply potential. Business service growth is more rapid in local economies with higher demand potential, while non-business-service sectors expand faster in areas where the business-service supply potential is greater. A key assumption is that business service firms operate in a monopolistic competition environment, where an increase in business-service capacity leads to an expansion in the variety of services offered. This, in turn, enhances the diversity of service offerings in municipalities with strong demand potential. Additionally, service providers not only deliver innovation-related information to client firms but also unintentionally disseminate knowledge within the region, fostering knowledge spillovers among firms.

Suggested Citation

  • Borje Johansson & Johan Klaesson, 2024. "Business services in regional economies: exploring the co-evolution of supply, demand, and sectoral interactions," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 73(4), pages 1497-1516, December.
    • Handle: RePEc:spr:anresc:v:73:y:2024:i:4:d:10.1007_s00168-024-01321-x
    DOI: 10.1007/s00168-024-01321-x
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    References listed on IDEAS

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    1. Richard Shearmur & David Doloreux, 2013. "Innovation and knowledge-intensive business service: the contribution of knowledge-intensive business service to innovation in manufacturing establishments," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 22(8), pages 751-774, November.
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    9. Åke E. Andersson, 2013. "Knowledge Accessibility, Economic Growth and the Haavelmo Paradox," Advances in Spatial Science, in: Johan Klaesson & Börje Johansson & Charlie Karlsson (ed.), Metropolitan Regions, edition 127, chapter 0, pages 73-90, Springer.
    10. Martin Andersson & Börje Johansson, 2012. "Heterogeneous Distributions of Firms Sustained by Innovation Dynamics—A Model with Empirical Illustrations and Analysis," Journal of Industry, Competition and Trade, Springer, vol. 12(2), pages 239-263, June.
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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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