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OCR for page 357
Technology Adoption:
The Services Tousles
JAMES BRIAN QUINN
In considering the impact of technology on economics, a particular
focus is needed in this country on the services industries, in which
most new companies are rising. As in earlier eras of development,
we do not Mow today which of these ventures will blossom into entire
new industries or giants themselves. But the past predicts that some
will do so. A major question is whether they can provide the trading
might this nation will need for its future health.
Paul A. David, N. Bruce Hannay, and Daniel I. Ok~moto (in this volume)
have presented Tree excellent, thorough, and well-structured discussions of
key aspects of industrial competitiveness and how the adoption of new tech-
nologies affects competitiveness. This chapter amplifies three themes that I
believe are perhaps underemphasized in Hose chapters, namely, ( 1) He dom-
inant importance of intellect applied through technology in creating weals,
economic grown, and value added; (2) the extraordinary role that individual
fanatics, randomness, and entrepreneurship play in this process; and (3) He
importance of technology in He services sector.
TECHNOLOGY, ECONOMICS, AND ENTREPRENEURSHIP
The concepts of economics and technolo ,y should be integrated at the
most fundamental level. Economics is the study of the creation and dism-
bution of weals, or value. Technology is the methodology through which
wealth is predominantly created. Most prevalent economic models tend to
explain the accretion of weals as a slow, upward climb that is achieved
Trough exploitation of marginally ever-less-productive natural resources (land),
marginal productivity gains made by millions of workers (labor), accumulated
357
OCR for page 358
358
JAMES BRIAN QUINN
efficiencies from the deployment of plant and machinery (capital), and im-
provements in "hangman capital" through education, training, and health en-
hancement. Yet within each of these basic factors of production, it can be
demonstrated that it is the technology embodied in capital (not the presence
of capital), the management and physical technologies Mat labor uses (not
employees working harder3, and We resources released by technology (not
land itself) are the Due grown forces. Technology deserves to be treated as
it is in Denison's broad definition as creating some 70 to 80 percent of
U.S. economic grown and not as a "residual" of unexplained events.
Equally important for policy purposes, however, is the fact that the ap-
plication of technology and Me creation of wealth do not occur through
disembodied interactions of capital, markets, profits, or monemy move-
ments. Instead, much of a modern nation's creation of weary and value
results from acts of intellect and energy initially supplied by a few talented
and determined (fanatic) individuals and companies whose impact is all out
of proportion to the resources they themselves employ. In modern history
Me four traditional sources of marginal grown have been dwarfed ~ total
bv entrepreneurs creating entirely new sources of weals launching monads
-a ----I ~ ~ ~ ~ ~
~ . ~ _ ~ _ ~ _ ~ _ ~4 _ ~ ~ ~ ~ ~ ~
of new enterpnses, Snug people to co things and lo provide services not
available in the past, and generating whole new industnes (often with enor-
mous support infrastructures) never previously envisioned. Often these are
based on new scientific concepts or technologies—acts of intellect never
before conceived or exploited.
Many studies have found Mat entreprenealIia1 innovators are driven by
more than mere economic motives or "profits." They want to be "the first"
to accomplish a task, be famous, have "freedom," be their "own bosses,"
do something "worthwhile," and so on. Watson, Moore, and Swanson (in
this volume) recall such comments. Gordon E. Moore (of Intel), for example,
says Mat he and his colleagues broke away from Fairchild to be their own
bosses, to control Heir destinies, to develop the frontiers of their technologies,
as well as to make profits. Robert A. Swanson recalls that Herbert Boyer,
his cofounder at Genentech, wanted to see the fantastic potentials of bio-
technology exploited for human welfare. Abroad, one finds Hat Mr. [buka
(founder of Sony Corporation) wanted to help Japan's economic recovery,
employ his talented group on worthwhile projects, and invent entirely new
electromechanical devices to serve Japan's war-torn economy. Champions
in larger companies too (like Alastair PiLkington of PiLkington Bros. Ltd.)
are driven "to invent, to revolutionize a staid industry, to do something truly
worthwhile." And so on.
Because of such motives, entrepreneurs doggedly persist when mere capital
sources would give up. Their high motivation eventually creates a margin
of value that would not otherwise exist. Fortunately, our society honors and
rewards such actions. Many countries, however, do not appreciate "people
OCR for page 359
TECHNOLOGY ADOPllON: ME SERVICES INDUSTRIES
359
who raise their heads above He crowd." Because of the driving power of
such motivations, maintair~ing a climate friendly to entrepreneurs should be
a central focus of any economic grow policies in the United States.
~ was fascinated to note Hat recently young Japanese were asked what
personas) they would most like to emulate. Their top choices were Akio
Mor~ta (chamnan of Sony) and Soichiro Honda (founder of Honda Corpo-
ration), two of the greatest entrepreneurs in modern Japan. If the Japanese
can harness these desires through policy, they may be even more formidable
in world markets.
CREATIONS OF TB MIND
Why should policymakers and economists be especially interested in He
entrepreneurial component of society? All value is created in the Buds of
human beings. And technology—systematic application of knowledge to
useful purposes is the most pervasive way of creating economic value.
Virtually all modern industries, whether traditional or not, are direct creations
of technology, deriving solely from He genius of the human mind. Perkin's
analysis of unappealing coal tar derivatives, for example, led to synthetic
dyes and to the modern chemicals industry. Carothers created the modern
fibers industry and Baekeland the modern plastics industry as their esoteric
experiments unraveled the characteristics of very large molecules. Edison's
emp~ncal applications of unviewable electron flows and resistances created
the electrical equipment industry. Telecommunications is almost entirely an
artifact of human intellect with no perceivable analog in nature. Fleming's
obseIvahons and insights initiated He modern phannaceu~acals industry. Cohen
and Boyer started the biotechnology revolution by defining He interactions
between restriction enzymes and the genetic structures of plasmids. Observing
and manipulating the unwanted Edison effect led to vacuum tubes and to the
electronics industry. Intellectual conceptualization of semiconductor phe-
nomena and the abstractions of binary mathematics created He computer
industry and its by-products. And so on.
Each of these major industries was created and developed largely by the
imagination and intellect of a few fanatic entrepreneurs. In each case mar-
velous accidents or random events (like the mold blowing onto Dr. nem~ng's
cultures or Townes's envisioning the laser while looking at the azaleas in
Lincoln Park) precipitated major spurts of progress. So probably will the
next series of modem industries be created, not by rigorous national planning,
but by some unforeseen act of irnagmation and intellect.
In addinon, technology releases He resources to develop these new in-
dustries—3 percent of the U.S. population in farming and some 22 percent
in manufac~nng now produce far more than the 70 percent in agriculture
or He 60 percent in manufacn~nng did in earlier years. Technology and
OCR for page 360
360
JAMES BRIAN QUINN
human imagination have opened new energy and mineral resources deep in
the earth that were inaccessible a few years ago. And they will doubtless
continue to create such unexpected new regimes of wealth in the future.
However, to ensure that they do, we must attack economic growth issues
with policies and incentives that stimulate the effective development and
application of intellect for useful purposes—not primarily as issues relating
to monetary policy, investment, market saturation, inflation, and so on.
Technology's force is so great that the absolute and comparative wealth
of nations is determined today largely by how well they develop, guide, and
utilize their technological capabilities. Japan, Hong Kong, and Singapore-
which after World War lI had virtually no capital, few natural or raw ma-
terials, and minuscule physical space have proved this point perhaps better
than any other carefully controlled experiment could. These nations concen-
trated on people, technology, motivation, and capital formation. Often for-
gotten in discussions of the "Japanese miracle" are the country's high
investments in technical education and the dramatic lowering of taxes in the
early 1960s (brought about principally by Ishibashi and Ilceda) to increase
savings rates and redirect Japan's capital flows toward the private sector and
industrial investments.
INNOVATION
Other than the exploitation of inexpensive and abundant raw materials,
relative national wealth depends primarily on two factors: (1) continuous
productivity improvement, predominantly achieved by technology diffusion,
and (2) innovation, the first application (or reduction to practice) of a useful
concept in a social system. Why the special interest in innovation? Because
when the innovator does something better than anyone before, he or she
creates a margin of wealth not previously available. Profit margins accessible
to innovators, therefore, tend to be temporarily higher than those for more
mature enterprises. Verifying this, the major studies of venture capital funds
show that average after-tax returns on such investments are greater than 24
percent compounded annually (Figure 11. And, it should be noted, no profes-
sionally managed venture capital fund has gone bankrupt to date. This prob-
ably means that there has been an undercommitment to this area in the past.
However, as Gordon E. Moore notes, this may be changing today.
Various studies have demonstrated He relationship between capital in-
vestment and productivity (Figure 21. Venture capital is a special case of
investment largely directed specifically at innovation and smaller companies.
The classic studies by Birch and the U.S. General Accounting Office (GAO)
suggest that from 65 to 80 percent of He new jobs in the United States are
created by companies with fewer than 100 employees. Consequently, policies
that selectively encourage technological investment, and particularly early
OCR for page 361
TECHNOLOGY ADOPTION: THE SERVICES INDUSTRIES
24
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361
VENTURE 1ST CHICAGO STANFORD HARVARD
E CON ON IST
FIGURE 1 Histoncal rates of return (ROR), according to major venture capital studies.
SOURCE: From Centennial Research & Development Company, Investing in Venture
Capital by Pension Funds Denver Colo.: February 1985).
venture investments, should stimulate the At, Latest long-ten economic grown,
employment, and widely distributed wealth. The GAO and other studies also
indicate that policies stimulating venture capital grown in the United States
since 1978 (especially decreasing capital-gains taxes and allowing pension
funds to invest in venture capitals have dramatically increased the availability
of such capital (Figure 3) and produced an entirely new kind of economic
recover based on many small, highly dispersed high technology and service
units.
Besides producing higher margins on their own, these small, innovative
firms also stimulate responses by larger companies and leverage their own
impact by supplying components for larger companies or by exploiting We
"ripple effects" of larger companies' innovations. These interactive rela-
tionships help to achieve continuous productivity increases for the entire
county. Beyond this, however, most radical innovations come from outside
the industries they most seriously affect. And (numerically at least) most
seem to come from relatively smaller companies. Why? It is probably inherent
in the essentially egocentric, probabilistic, and partially random nature of
OCR for page 362
362
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JAMES BRIAN QUINN
Japan ~
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Italy · i
Belgium
.
France ·
/
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Sweden Germany ~~e,\~'° ~~a`'°
Belgium /
France ~ Germany
Canada · or
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-
· Sweden
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L I ~ 11~
7 8 9 10 11 12
0 1 2 3 4 5 6
I NCR EASE I N CAPITAL/LABOR UN IT (x)
FIGURE 2 Rates of change in output, capital per unit of labor.
SOURCE: From John W. Kendrick, International comparisons of recent productivity
~ends, in Measuring Productivity: Trends atul Comparisons, from the First International
Productivity Symposium, Tokyo, Japan, 1983 (New York: Unipub, 19841.
innovation itself. Whether the innovation occurs in a large or small company,
virtually all technological histories (including Watson's personal classic, The
Double Helix) demonstrate that scientific advance and technological inno-
vation are largely unplanned (in a systems sense), highly chaotic and inter-
active (in organizational terms) and partially irrational (from a financial
viewpoint). From a social as well as corporate perspective, we should begin
to accept these charactenst~cs as fact and learn to manage and stimulate
innovation accordingly.
OCR for page 363
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TECHNOLOGY ADOPTION: THE SERVICES INDUSTRIES
363
Unless there are very large amounts of capital involved, Me sheer number
of mals initiated by small entrepreneurs and their capacity to dedicate them-
selves single-mindedly to their proposed solutions combined win their
capacity to move rapidly without intervening bureaucratic or power structures
hindering progress—undoubtedly increase the probability that some will suc-
ceed. If the probability of success is 1 out of 100 and there are 500 to 1,000
dedicated individual entrepreneurs working, on a problem, We likelihood that
one will succeed is vastly increased. But the small scale and highly dispersed
nature of small failures also tend to disguise the true cost of individual
entrepreneurial losses to the society. Because we cannot identify the costs
of Me 499 to 999 who fail, perhaps individual entrepreneurship looks more
"efficient" than it should.
Entrepreneurship also has another fascinating interaction with economics.
t
-
-
-
~ 0
1979 1980 1981 1982 t983 1984
FIGURE 3 Capital commitments to venture firsts, 1979 to 1984 (billions of current
dollars).
SOURCE: Original data from Venture Capital Journal, compiled by Centennial Research
& Development Company in Investing in Venture Capital by Pension Funds (Denver,
Colo., February 1985).
OCR for page 364
364
JAMES BRIAN QUINN
Most industry structures are not so much determined by "competitive anal-
ysis" or "industry analysis" as modern strategic texts might indicate. In-
stead, their basic structures and locations largely derive from the strategic
and values choices of the entrepreneurs who created them. The computer
industry, for example, is structured the way it is because Watson and Learson
decided to concentrate IBM's efforts on a compatible mainframe line for the
"center" of the computer market; because Norris and Cray wanted to create
the world's fastest and largest computers; and because Olsen and Jobs saw
opportunities in much smaller computers when others did not. Regional
economies are vastly affected too. For example, the major semiconductor
(and, consequently, the later microcomputer) companies (according to Stan-
ford economist Brian Arthur) located on the West Coast and in Silicon Valley
basically because William Schockley's mother lived there, and key tech-
nologists flocked to join him as the industry formed.
The effectiveness of small-scale entrepreneunal innovation and the need
to support this actively through policy seems beyond question. But one of
the most often repeated errors of industrial policy (in Europe, the Soviet
Union, China, and other industrializing countries) has been to focus on larger
enterprises—and government interventions to "rationalize" these units
rather than the much less deterministic processes of stimulating individual
entrepreneurs and entirely new enterpnses. In the United States, such policies
in the last two decades would have led to supporting a group of Fortune 200
enterprises that lost employment and market position, rather than encouraging
He new companies (over 600,000 created in 1984 alone, see Figure 4) that
produced the most new jobs and wealth for the country. A particular focus
is needed in this country on the services industries, where most of these new
companies are rising. As in earlier eras of development, we do not know
today which of these ventures will blossom into entire new industries or
giants themselves. But the past predicts that some will do so. A real question
exists, however, whether Hey can provide the trading might this nation will
need for its future health.
THE SERVICES INDUSTRIES
Depending on how it is measured, between 67 and 75 percent of the U.S.
economy today is in "services" activities. Our major trading partners are
moving in the same direction (Figure 51. Does technology have an impact
in the services industries similar to that in manufacturing? What has the
adoption of technology been there? How does this affect national compeii-
tiveness?
For this short commentary, I have put together only a few measures Hat
suggest the pervasiveness of technology adoption in the services sector.
Although productivity in the services industries is notoriously difficult to
OCR for page 365
TECHNOLOGY ADOPTION: THE SERVICES INDUSTRIES
700
600
cn
cn
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m
~ 400
Lo
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ILL
O 300
An
~ 200
o
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365
1950
1 984
FIGURE 4 New corporate business creation in the United States, 1950 and 1984.
SOURCE: U.S. Department of Commerce, Bureau of the Census' Statistical Abstract of
the United States (Washington, D.C.: U.S. Government Printing Office, appropriate
years), Table 876.
measure, these indicators offer some interesting insights about the macroim-
pact of technological change in the services sector. Where possible, direct
measures of service output were used. When this was not possible, He Bureau
of Labor Statistics (BLS) composite productivity measurements, which apply
a composite of measurable output factors to approximate "output" in venous
services sectors, became the preferred source. Some international compari-
sons between the output of U.S. services industries and those of over coun-
tries also are included. However, because of differences in He way data are
collected and in the definitions used by various countnes, significant inter-
national comparisons were not feasible in many cases.
Productivity Versus Manufacturing
U.S. manufacturing productivity improved at an average annual rate of
about 2.8 percent between 1960 and 1983. The BLS index of relative output
per employee showed that productivity improved in certain important services
sectors milch more rapidly than In manufacturing. This was most notable in
OCR for page 366
366
JAMES BRIAN QUINN
70
~4
~0
42
-
-
-
-
1960 1965 1970 1975
United
States
United
Kingdom
F rip nap
W. Germany
1980 1981 1982
FIGURE 5 Dis~ibunon of employment in services industries, selected years, 1960 to
1982.
SOURCES: U.S. Department of Labor, Bureau of Labor Statistics, Har~dhook of Labor
Stansucs, Bulletin 2175 (December 1983~; U.S. Department of Commerce, Bureau of
Me Census, Stai:sucal Abstract of the United States (Washington, D.C.: U.S. Government
Printing Mace, appropriate years).
telephone/communications, air transportation, railroad, and gas/electric ubl-
iiies indlls~ies dunog tile period 196~1983 (Table 11. The first Wee sectors
were significantly ahead of Me somewhat reduced productivity rate increases
in manufacturing during Me 1970-1983 penod. Some international com-
TABLE ~ BLS Index of Relative Output per Employee
J=dus~y
Average Annual Improvement
1960 1983
197~1983
Telephone/communicadons 6.1% 6.8%
Air transportation 5.8 4.5
Railroad (rev. traffic) 5.1 4.8
Gas, electric utilides 2.7 1.Oa
Commercial bulking _ o.gb
Hotels/motels 1.6 0.8
al981 data.
bl982 data.
SOURCE: Bureau of Labor Statistics, Office of Productivity and Tech-
nology.
OCR for page 367
TECHNOLOGY ADOPTION: THE SERVICES INDUSTRIES
TABLE 2 Labor Productivity Levels (1975 dollars per hour)
Japan U.S. U.S./Japan
Sector 1970 1980 1970 1980 1980
-
Private domestic business 3.59 6.01 9.40 10.06 1.67
Agnculture 1.37 2.38 16.53 18.36 7.71
Selected services
Transpo~anon and
communications 3.86 5.66 9.29 13.14 2.32
Electricity, gas, water 14.01 19.74 21.98 25.38 1.29
Trade 2.88 4.53 6.88 7.92 1.75
Financial and insurance 6.69 12.03 8.21 8.20 0.68
Business services 3.39 3.60 7.69 7.59 2.11
Manufacn~nug 3.91 8.00 7.92 10.17 1.27
SOURCE: Measuring Producnviry: Trends and Comparisons, from the First Intemanonal
Productivity Symposium, Tokyo, Japan, 1983 (New York: Unipub, 1984).
367
parisons show the United States outperforming Japan by an important margin
in labor productivity levels in selected services sectors (Table 2~.
Individual services industries donated by technological changes (like
telephones/commun~cations) had spectacular labor-productivity improvement
(Figure 61; others, like hotels, motels, and commercial banking, seemed to
have lower increases In labor productivity; and some, like education, are
perhaps even negative. In-house studies showed that technology lowered
transaction costs significantly for individual banks that automated extensively
(Table 3), but, bankers frequently found, as so omen happens elsewhere,
Mat faced win lower costs and greater convenience—customers changed
their behavior patterns and increased Weir number of transactions, thus ob-
scunng overall efficiency changes.
More importantly, many of the services industries on which we rely for
employment and convenience simply could not operate without modern com-
mun~cations and computer capabilities. Without these technologies, bankin ,,
insurance, financial services, travel, air transportation, hotel, and other ~n-
dustnes would operate creakingly at best and chaotically out of control or
dangerously at worst.
Support Services lndustnes
Even though they are no paragons of productivity, Me postal services and
securities industries provide some sense of labor productivity increases in
certain `' support" services sectors (Table 41. Dunng the period 197~1982
bow groups' produci~wty increases exceeded nahona1 manufacturing aver-
ages by a substantial margin. The postal services, after a long laggard period,
began to improve markedly ~ Me 1970s as electronic sowing and new han-
dling systems were developed. Then entrepreneurship and aircraft technol-
OCR for page 368
368
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JAMES BRIAN QUINN
~-
Bell System
r
Communications ~ ~
I ndustry '/
Pr ivate
Domestic
Economy
....... . . .
1 , 1 , , 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ~ I I I
o
1950 195;5 ~ 960 1965 1910 t 975 1979
ENDURE 6 Postwar produciavitr compansons, 1948 to 1979.
SOURCE: From John W. Kendrick and A~nencan Produciivi~ Center, Improving Company
Productivity: Handbook With Case Studies (Baliunore, Md.: Johns Hopkins University
Press, 1983~.
TABLE 3 Impact of Technology on Banking Costs
Transaction Costs
Old New Saving
Check handling versus electronic teller
facility $0.20 $0.09 55%
plus float — 0.09 100
Automated client payments 0.31 0.06 81
Automated teller costs 0.87 0.40 54
OCR for page 369
TECHNOLOGY ADOPTION: TlIE SERVICES INDUSTRIES
TABLE 4 Average Annual Productivity Increases, Postal
Services and Secunnes Industries
Postal Secunues
Years Services Industry
195~1982 2.0 6.4
1960-1982 1.9 10.5
1970-1982 3.4 12.8
198~1982 3.4 9.7
NOTE: In pieces (shares) handled per employee.
SOURCE: U.S. Department of Commerce, Bureau of the Census, Stat~sucal
Abstract of the United States (Washington, D.C.: U.S. Government Print-
ing Office, appropriate years).
369
ogles combined to open the whole "express" mail industry, improving selected
services' times and quality by an order of magnitude. Next, dedicated elec-
tronics systems lowered costs so much that hard copy could be delivered
within minutes to remote points for about one-f~fth the cost of a letter. This
in turn led to a second-generation express or "zap message" service industry,
and so on.
The securities industry's 10 percent productivity improvement per year
between 1960 and 1982 suggests how much mail-handling efficiency might
perhaps have been improved if its ownership and management structures
permitted. Another measure shows loans or deposits handled per employee
in banking growing relatively slowly until 1970; then from 1970 to 1982
productivity in these teIms grew by an average 5.4 percent per year (Figure
71.0f course, such numbers do not purport to be very accurate measures;
they merely suggest the extent of technological change in some services
sectors.
Medical Care Services
In other service areas, technology has had even more profound effects.
Simple efficiency figures cannot measure the changes technology has wrought
in medical care. Whole disease classes—such as diphtheria, smallpox, tu-
berculosis, poliomyelitis, cholera, whooping cough, and scarlet fever have
ceased to be serious threats in modem societies (Table 5~. Orthoscopic and
microsurg~cal techniques have radically altered the cost and pain of joint
surgery. Fiber optic techniques allow surgeons to quickly diagnose and re-
move gall stones, kidney stones, digestive impairments, tumors, and other
types of unwanted growls—lowering costs and reducing hospital stays to
hours versus days or weeks. Advanced diagnostic techniques can prevent or
ameliorate many classes of serious debilitative diseases, including cancers.
Survival rates for heart patients have soared since 1970. Pharmacological
OCR for page 370
370
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1950 1955 1960 1965 1970
JAMES BRIAN QUINN
Productivity LoanslSecondary _
0~
-
~ Productivity Deposits
1975 1980 1981 1982
FIGURE 7 Product in banking, 1960 to 1982.
treatments have emptied mental hospitals In the last two decades. Much of
this dramatic progress has been technology-dnven. And genetic engineering
promises further improvements in diagnostic capabilities and cures for other
specific disease classes in the next decade.
It is interesting to note that pnor to He ~ntroducuon of pharmaceutical
"technology" (in the form of sulfa drugs and antibiotics, Were were very
few genuine "cures" that doctors could offer patients. Their primary role
was to ease pain and to allow natural processes to work. As in so many
manufacturing ~ndustnes, technology radically altered bow He capabilities
TABLE 5 Causes of Dead per 100,000 U.S. Population, 1900 and 1978
.
Cause of Death 1900 1978
Influen~'pnel~monia 202 27
Tuberculosis 194 1
Gastroententis 142 0
Nep}~rids 81 0
Diphtheria 40 0
Cardiovascular 137 443
Malignancies 64 182
SOURCE: National Center for Health Statistics, U.S. Vital S - sacs (Washington, D.C.: U.S. Gov-
ernment Printing Office).
OCR for page 371
TECHNOLOGY ADOPTION: THE SERVICES INDUCES
371
of the health care industry and our expectations from it Technology created
a whole "new market" of people living healthily into their mid-80s. And
through other Cripple effects," the technologies applied to health services
also profoundly altered the economics of insurance, Social Secunty, reure-
ment housing, special products for the elderly, and so on. So powerful is
their effect, even in manufactunng, that health care costs (added as fringe
benefits by many large manufacturing companies) now exceed in scale those
companies' total profits.
TOTAL IMPACT
There has been much concern that, "since technology could not be readily
applied to the services sector," a services economy would be inherently more
inflationary than a manufacturing economy. The information just presented
suggests this may not necessarily be true. In fact, even within the ~nanufac-
turing sector, much of technology's impact may be on "services and support"
activities, such as automatic R&D assays, CAD/CAE/CAM, quality assur-
ance, planning and control systems, market-informahon feedback, automatic
billing systems, or warehousing and distribution controls.
The more profound impacts of services technology have yet to be mea-
sured. Will an 85 to 90 percent services economy in the United States develop
an unacceptable dependency on the outside world for the raw materials and
manufactures we consume? Or will a lively international trade develop for
services as it did in the past for manufactured goods and matenals? Can a
nation develop a comparative trading advantage (hence a comparative weals
advantage) through services technologies? Will ease of entry and competi-
iiveness force low wage standards in all services industries? Or will tech-
nology create new barriers to entry Hat allow only giants like AT&T or IBM
to survive? The near-term effects would appear to be a vast restructuring
toward smaller, more localized and entrepreneurial companies, somewhat in
He tradition of He "pure competition model." But He long-term effects of
technology on the services industries and the total U.S. trade positron me
considerably less clear. This remains a major subject for study on He ap-
plicaiion of technology for national comped~veness.
OCR for page 372
Representative terms from entire chapter:
james brian
