What’s it? The quaternary sector is an economic sector with primarily knowledge-based and intellectual services. In the three-sector classification, businesses in this sector fall into the tertiary sector category. However, over time, experts have grouped them into separate sectors because their contribution to the economy has become increasingly significant—output, job creation, and impact on other sectors.
Economic activities in the quaternary sector provide services such as information and communication technology and computing. Media services, consulting, and research and development are other examples.
The quaternary sector in the classification
In the three-sector classification, we put this sector into the tertiary sector because both offer the same product, namely services. In other words, businesses in the tertiary sector also take action to help or do work for other parties, just like businesses in the tertiary sector.
But, unlike the tertiary sector, the quaternary sector includes only intellectual-based or knowledge-based economic activities.
The knowledge-based economy and technological advances have grown significantly and stimulated many innovations. The classification then separates it from the tertiary sector because the quaternary sector has contributed substantially to the economy.
In addition, businesses in the quaternary sector require higher skills than businesses in the tertiary sector, such as retail, transportation, or hospitality. Work in this sector is more brain-draining than human labor.
The quaternary sector is growing mainly in developed countries. Businesses in this sector are considered a driving force for innovation in other sectors. This sector has also spawned new industries like those generated by Google or Facebook. They also come up with new products and working methods.
Characteristics of the quaternary sector
Several characteristics distinguish the quaternary sector from other sectors, including the tertiary sector. Here are the points:
- High-skill and knowledge-based workforce: This sector demands employees with advanced skills and expertise in their respective fields. From software engineers crafting complex algorithms to researchers pushing the boundaries of scientific knowledge, the quaternary sector thrives on intellectual capital.
- High salaries: Due to the specialized nature of the work and the educational investment required, jobs in the quaternary sector typically command higher salaries than those in other sectors. This reflects the value these positions bring in terms of innovation and productivity.
- Concentration in developed economies: The quaternary sector flourishes primarily in developed countries with strong infrastructure and educational systems. These economies can provide the necessary resources, skilled workforce, and research institutions to foster this knowledge-driven sector.
- Capital and research-intensive: Businesses in this sector heavily invest in research and development (R&D) to create new technologies and processes. This requires significant capital resources to fund cutting-edge research facilities, specialized equipment, and highly skilled personnel.
- Engine of innovation: The quaternary sector acts as a powerhouse for innovation across the entire economy. By constantly developing new technologies and processes, it improves efficiency, creates new products and services, and drives economic growth. From advancements in telecommunications that revolutionize global communication to the creation of artificial intelligence that transforms industries, the quaternary sector is at the forefront of progress.
- Disruption of traditional businesses: The innovations fostered by the quaternary sector often disrupt existing business models and industries. E-commerce platforms, for example, have fundamentally changed the retail landscape, while advancements in automation have impacted manufacturing processes. This constant evolution, driven by the quaternary sector, forces traditional businesses to adapt and innovate to remain competitive.
Macroeconomic significance of the quaternary sector
The quaternary sector is growing rapidly in the United States and other developed countries. Its contribution is increasingly significant. Several reasons explain why the quaternary sector is important.
First, businesses in this sector have emerged as leading employers. They are a favorite place to work, especially for those with a college education.
Second, businesses in this sector generate high-added value. On the one hand, they directly create output through their products. On the other hand, they stimulate increased productivity in other sectors.
For example, robotics and computer-aided machines are innovations from this sector. Their progress has led to increased output in the manufacturing sector by displacing human labor. In addition, they contribute to quality improvement through greater precision than human hands.
Third, the quaternary sector has emerged as a driver for innovation. This sector creates technological advances for use in other sectors. For example, innovations in the internet and electronic devices have allowed e-commerce to beat conventional retailers.
Fifth, progress in the quaternary sector has contributed to disrupting conventional business. E-commerce is an example, digital publishing is another, and there are more, like 3D printing,
Sixth, businesses in the quaternary sector also create new methods and ways of doing things. Social media is an example. Their emergence has changed the way we interact with other people.
Work practices such as teleworking or working from home are other examples. They change how we work. We don’t have to sit in the office to finish work because we can do it anywhere. Thanks to advances in technology, we are becoming more mobile in our work.
Seventh, businesses in the quaternary sector also usually concentrate in certain cities. This then gives rise to economic centers, such as – the example in the United States:
- Software in Boston and San Francisco
- Automotive Engineering in Detroit
- Advertising in New York
Quaternary sector examples
The quaternary sector includes businesses with intellectual and knowledge-based economic activities. Examples are information technology and research and development. Their products – and some we may already be familiar with, include:
- Autonomous vehicle
- Artificial intelligence
- computing
- 3D printing
- Big data
- Internet of things
- Robotics
- Nanotechnology
In addition to information technology and research and development, the quaternary sector also includes businesses such as:
- Consulting services
- Educational services
- Financial planning services
Fostering growth in the quaternary sector
The quaternary sector emerged and marked the transition to a developed economy. In an ideal evolution, countries transform from less developed to developing countries. Then, industrialization drove the change to developed countries, followed by rapid tertiary sector growth.
The next stage is progress toward the quaternary sector. At this stage, economic progress is in the mature phase. An example is the United States, which has developed from an industrial economy to a more developed country.
The quaternary sector needs to grow. Developed countries—such as the United States—have invested heavily in educational institutions to enable citizens to obtain advanced education. They have also created research and educational centers. Their investment has created specialized skills to drive continuous progress and innovation in information technology, computer development, and research and development.
The quaternary sector also usually thrives near complexes or originates from major universities. Prestigious colleges offer pools of college graduates to recruit. In addition, they have also emerged as new innovators.
Many leading global companies were built by people from prestigious universities—although some may be dropouts. See how Bill Gates started his business, Microsoft, or how Mark Zuckerberg founded Facebook, or how Larry Page and Sergey Brin brought up Google through their research project in 1996.
Lastly, prestigious universities are also centers for cutting-edge research. Many companies in the quaternary sector consult and partner to come up with new innovations.
The future of the quaternary sector
The quaternary sector, as a knowledge engine driving economic growth, is poised for continued evolution. Here are some key trends shaping its future:
- Rise of
artificial intelligence (AI): AI is rapidly transforming various industries, and the quaternary sector itself will be a major player in its development. Advancements in AI will likely lead to the creation of new jobs and industries, while also automating some existing tasks within the quaternary sector itself. - Big data revolution: The ever-increasing volume of data presents both challenges and opportunities for the quaternary sector. New technologies and expertise will be required to analyze and utilize this data effectively, leading to innovations in areas like personalized medicine, targeted marketing, and efficient resource management.
- Evolving nature of work: As automation and AI take hold, the skills and knowledge required for success in the quaternary sector will likely change. A focus on adaptability, creativity, and critical thinking will be increasingly important alongside technical expertise.
- Global collaboration: The global economy’s interconnected nature means collaboration between researchers, businesses, and institutions across borders will be crucial for continued progress in the quaternary sector.
- Ethical considerations: As the quaternary sector pushes the boundaries of technology, ethical considerations regarding privacy, data security, and the potential impact of AI on society will need to be addressed proactively.
