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Further, this paper suggests, in addition, that dynamic Knowledge Regions also
exhibit, from political and institutional perspectives , the attributes of 'learning
systems', such as entrepreneurial ability and relational skills. Such attributes of
learning systems reflect the cultures of local entrepreneurial social, economic, and
political agents, stimulating them to innovate institutionally and organizationally
(Lakshmanan and Button 2009 ). Further, the creation of new “Governance
Systems” in metro regions (e.g. inclusive urban stakeholder policy decision and
implementation processes as in Boston) facilitates, among metropolitan private,
public, and civil society actors, new modes of interaction, decision making, and
implementation of projects and programs. Such governance changes speed up the
physical adaptation of the metro region—in the form of rapid generation of new
urban physical infrastructures and land uses appropriate to a transition from a
mature industrial region of the late twentieth century to a globally operative
contemporary Knowledge Region (Chatterjee and Lakshmanan 2009 ; Lakshmanan
and Chatterjee 2006 ).
18.4.2 Evolutionary Shift to the Knowledge-Intensive Service
Economy
In the U.S. where the transition to the service economy is advanced, the share of
service employment has progressed from a little over 50 % in 1950 to over 75 % by
year 2000. A less observed characteristic, over the past two to three decades of the
US transition to a service economy, is that the share in the economy of business
services has grown monotonically, as the share of the manufacturing sector has
been dropping. This continuing growth of Business Services reflects a qualitatively
new stage in the structure of production and an increasingly complex division of
labor between economic sectors (Kox and Rubalcaba 2007 ).
The argument advanced here is that in recent decades business services (parti-
cularly, Knowledge Intensive Business Services, KIBS) have contributed heavily to
the US and Megalopolis economic growth, in terms of employment, productivity
and innovation. A direct growth contribution stems from the business services
sector's own remarkably fast growth, while an indirect growth contribution was
caused by the positive knowledge and productivity spill-overs from business
services to other industries. The spill-overs come in three forms: (a) from original
innovations, (b) from speeding up knowledge diffusion, and (c) from the reduction
of human capital indivisibilities at the firm level. The external supply of knowledge
and skill inputs of KIBS sectors exploits positive external scale economies and
reduces the role of internal (firm-level) scale (dis)economies associated with these
inputs.
Further, the KIBS sector includes the major corporate central organizational
services, such as financial, legal, accounting, and many professional services. Such
services permit corporations with headquarters in New York or Boston to coordi-
nate their various value-adding production chains spread across the globe. Thus
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