What is a Key Industry?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 10 November 2018
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A key industry is an industry which is considered highly important to a national economy. There are a number of reasons why an industry may be viewed as key; size is only one of the considerations when evaluating national industries. Governments recognize the value of key industries within their borders and may take steps to protect their key industries as needed. This can include intervening if the industry appears to be failing to prevent a ripple effect which spreads across the economy and contributes to the development of a recession.

One example of a key industry in many nations is the defense industry. The defense industry employs many citizens, providing immediate economic benefits, and it also provides protection and enhances national security. The more secure a nation, the stronger its economy tends to be. Thus, there is an incentive to keep the defense industry healthy and to do things like awarding defense contracts to domestic companies in order to keep this key industry strong.


Financial services is another key industry in many countries. Numerous people are employed by financial institutions, ranging from bank tellers to stockbrokers. In addition to providing employment, this industry is a key element of the economy as a whole because the health of the financial services industry influences the availability of credit, the strength of a nation's currency, and many other economic factors. As a result, many nations protect this key industry with business incentives and other measures which are intended to keep financial companies doing business domestically.

Manufacturing can also be a vital industry. Automotive production was a key industry in several nations during the 20th century, employing numerous people directly in the production of cars along with people in allied industries such as parts manufacturing and vehicle maintenance. Other key industries might have to do with primary exports, such as unique food products, metal ores, and so forth. Unique products associated with a nation can also be part of a key industry since the government is aware that such products cannot be obtained elsewhere.

When an industry is identified as key to a national economy, it is followed closely by government economists. Economists want to see steady economic growth and will promote the development of key industries which will anchor the economy and allow it to grow. Nations with developing economies may conduct research to identify potential key industries so that people can be encouraged to get involved with such industries in order to promote economic development.



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