The interaction between knowledge-intensive business services and urban economy

While the importance of knowledge-intensive business services (KIBS) has been rapidly growing in our knowledge-based era, most studies have analyzed KIBS in European countries. This study highlights the spatial patterns and economic impacts of KIBS in the US Metropolitan Statistical Areas (MSAs) by employing a new cluster quotient (CQ) index and Seemingly Unrelated Regression model. First, this study finds that Washington, DC, plays an important role in KIBS clusters and the CQ index would be a better index than the location quotient (LQ) index for measuring the magnitude of clusters given that LQ cannot consider the agglomeration of industries into its index. Second, this study highlights that KIBS and the GDP positively interact with each other. For example, the GDP shows an elasticity of 0.084 for KIBS, and KIBS exert an impact on the GDP with an elasticity of 0.515. The findings suggest that KIBS can be an economic driver for the US MSAs, and urban practitioners should develop policies for KIBS to promote regional economic growth.