Service Activities and Regional Development: Some European Examples

Two general issues relating to the nature of the service sector are addressed in this paper. The first concerns the growing interdependence between the secondary and tertiary sectors, largely a function of the increased use of service functions in the manufacturing process; these service inputs may be either internalized or externalized by a manufacturing firm. The second issue concerns the role of the service sector in promoting regional economic development. It is generally acknowledged that, although it may be important for a region to possess a sufficient level of service activity so that its firms are not required to make major service imports, because of externality effects, high-order service activities tend to locate in major cities. Can it therefore be concluded that the locational pattern of the service sector has a minimal potential for reducing regional disparities, and that it would be unrealistic to expect the diffusion of services into peripheral regions? This may be the case for higher order services, but those more directly linked to industrial production may indeed be able to be decentralized. The potential for the decentralization of services activities is examined both within a conceptual framework and by reviewing the results of certain empirical studies conducted in Switzerland.