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. But, over time, experts grouped them into separate sectors because their contribution to the economy has become increasingly significant – output, job creation, and their impact on other sectors.
Businesses in the quaternary sector provide services such as information and communication technology and computing. Media services, consulting, and research and development are other examples.
Several characteristics distinguish the quaternary sector from other sectors, including the tertiary sector. Here are the points:
- Requires high skills and knowledge
- High salary levels
- Growing up primarily in developed countries
- Capital-intensive and research-based
- A driver for innovation
- Conventional business disruptor
Why is the quaternary sector important?
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 example. There’s more like 3D printing, artificial intelligence, and machine learning.
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. We are becoming more mobile in our work thanks to advances in technology.
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
Separating the quaternary sector from the tertiary sector
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 actions 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.
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
- 3D printing
- Big data
- Internet of things
In addition to information technology and research and development, the quaternary sector also includes businesses such as:
- Consulting services
- Educational services
- Financial planning services
Growing 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 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 drop-outs. 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.
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