RGP Analysis and Policy Tasks for Regional Industries

Growth potential is the totality of growth factors that can contribute to current or future growth. The core growth potential of the digital economy era should be identified in business and industrial capabilities that are expressed based on human capital and regional innovation. Therefore, regional growth potential (RGP) can be defined as the sum of regional growth performance (Y), corporate/industrial capabilities (K), human capital capabilities (H), regional innovation capabilities (I), and local community capabilities (S). Based on this framework, this paper designs a system of RGP indicators and employed it in an analysis of megaregions, municipalities, and provinces. The results of the analysis suggest the following. First, RGP has a mechanism by which human capital/local innovation/local community capabilities translate into corporate/industrial capabilities that in turn result in regional growth performance. Second, the mechanism by which RGP is expressed exhibits a higher correlation at the megaregion level than in individual cities or provinces. Third, the growth potential gap between the Seoul Capital Area (SCA)/ the Chungcheong megaregion and other megaregions has been widening. Fourth, the decrease in the relative growth potential of the Southeast megaregion and Daegu/Gyeongbuk megaregion — which together host clusters of Korea’s flagship manufacturing industries — is a serious problem which needs to be addressed as at the national industrial policy level. Finally, regions with excellent growth potential show distinctive characteristics compared to regions with poor growth potential at the municipal and provincial levels. Based on this, this paper suggested the following policies to promote regional industries. First, policy efforts should be stepped up to expand innovation investment in existing flagship industries and foster new industries. Second, it is necessary to nurture talented workers who will lead innovation in the digital economy era and expand innovation support primarily for talented workers who are likely to stay in the region. Third, the focus should be on creating quality jobs with high added value targeting knowledge service industries connected to region-specific manufacturing industries. Fourth, it is important to create a compelling regional environment for startups and skilled workers.