Enabling Data-Driven Growth in the Service Sector through Policy Reform: An Analysis of Korean Enterprise Survey Data

As data plays an increasingly important role in many service industries, there has been a growing need for a more effective and systematic legislative and regulatory support structure to foster greater data use in these industries. This report examines the current state of data use in Korean service industries, and proposes ways to further promote data utilization. The demand for data by service firms in South Korea has been growing rapidly. Data use is more common among large corporations and businesses with short business histories. Relative to non-service industries, firm size has a weaker correlation with firm data utilization in the service sector. The extremely diverse nature of the service industry also means that data use is concentrated in a handful of segments, such as the information and communications, finance, and trade and logistics sectors. A survey of service businesses on data use shows that firms in these industries mainly collect and use data for two reasons: to develop and improve their products and services and to support marketing efforts. Of the various types of data available, customer information is most commonly used. However, the survey also found that various laws and regulations constrain firms’ utilization of data. In Korea, the Personal Information Protection Act sets limits on how firms may use customer data, and firms also identified the possibility of legal disputes erupting over personal data use as a significant barrier. In addition, both firms that use data and firms that do not pointed to a quantitative and qualitative lack of skilled workers as the biggest hindrance to increased data use. Policy support should therefore be focused primarily on developing human resources with data skills to facilitate increased data use in service industries. The Korean government has already undertaken various initiatives to educate and train data specialists, but these efforts have been insufficient, and a number of factors have conspired to limit the effectiveness of the programs. Policymakers need to strengthen ties between various courses and extend the training periods of data specialists, while also introducing new Ph.D programs at specialized graduate schools. Guidelines are also needed to expedite data standardization and integration across industries. Systems of governance should also be established in different service industries to help alleviate the legal burden on firms that use data.