This paper examines the role of entry and exit in productivity growth of 14selected service industries in which Korean government aims to reduceexcessive entry. Using data on Economic Census from 2005 to 2010, we findthat the differences in the entry and exit rates account for approximately 16% and 2% of regional differences in labor productivity growth, respectively. Theresult suggests that the observed high rates of entry and exit in the serviceindustries may exhibit the dynamic process of productivity growth rather thanexcessive competition.