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Introduction to Services Industries
Policy Issues
BRUCE R. GUILE
Services industries allow the management and financing of a nation's
productive system and are the way an economy organizes itself to meet
essential needs such as health care, transportation, communications, edu-
cation, and the distribution of goods. Services industries are core economic
functions in any economy and are the dominant economic activity in indus-
trialized nations, accounting for the majority of both jobs and national output.
Also, modern services industries are technologically dynamic actively en-
gaged in the development and application of virtually all advanced technol-
ogies. The companion volume to this book, Managing Innovation: Cases
from the Services Industries (Guile and Quinn, 1988), samples services in-
dustries to illustrate the contribution of technological advance in services
such as stock exchanges, banking, cellular telephone services, automotive
repair, engineering design, and express package transportation. This is not
to propose that services are somehow more important than manufacturing,
agriculture, or natural resources industries but rather to initiate the argument
that there is a technological/ecological principle at work that renders each
sector dependent on all other sectors for the level of its productivity. This
volume explores these relationships and the growing reliance on services
industries for the management and control of an ever more complex formal
economy. In exploring the importance and technological dynamism of ser-
vices industries, the volume joins, indirectly, an active policy debate about
U.S. deindustrialization.
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BRUCE R. GUILE
SERVICES AND THE DEINDUSTRIALIZATION DEBATE
In recent years, large U.S. merchandise trade deficits, the shrinking of
several traditionally important U.S. manufacturing industries, and the growth
in services industries employment have spawned an active debate about U.S.
"deindustrialization" (see Bluestone and Harrison, 1982, 1986; Cohen and
Zysman, 1987; Lawrence, 19841. The concept of deindustrialization brings
together a wide array of concerns. Is the U.S. level of investment in man-
ufacturing plant and equipment sufficient? Are U.S.-based manufacturers
keeping up with foreign competitors in terms of production technology? Does
the loss of certain manufacturing jobs to foreign-based production have ir-
reversible consequences for the level and distribution of U.S. wages and
household incomes? These are indeed critical national issues; manufacturing
performance is an important element of economic performance in any large
industrialized economy.
The problem arises in posing the issue of deindustrialization as one of
manufacturing versus services. The growing importance of services industries
in the U.S. economy is. often mistakenly cited as evidence of deindustriali-
zation, as evidence of a crisis in U.S. economic performance. In reality,
goods and services industries are wholly interdependent and equally important
elements of the U.S. economy. Additionally, the shift to "a services econ-
omy" has not been a rapid, dramatic change but a steady trend, seemingly
consistent with a sound, balanced, industrial economy. That conclusion arises
from considering long-term trends in output and employment.
With regard to output, the most commonly used data series is the Gross
Product Originating (GPO) series published by the Department of Commerce
Bureau of Economic Analysis. Table 1 shows the level of output and share
of output in selected major sectors of the U.S. economy between 1948 and
1987. As Table 1 illustrates, durable and nondurable goods manufacturing
(and retail trade) have grown in absolute terms but are virtually unchanged
in magnitude relative to the size of the whole economy. Several sectors have
diminished in relative size. Agriculture, forestry, and fisheries; mining; trans-
portation; construction; and government account for significantly smaller
portions of national output than they did in 1948. The relative decrease in
those sectors has been accompanied by significant increases in the share of
output contributed by communications; wholesale trade; finance, insurance,
and real estate; and services. The services grouping includes a wide variety
of services including health, business, legal, amusement, and hotel services.
In summary, although some services industries have grown substantially in
importance since the late 1940s, the data do not show a decline in the relative
contribution of manufacturing output to the U.S. national economy (for
further discussion, see Cremeans, 1985; Lawrence, 1984; Moody, 1985~.
Although the validity of the GPO series has been challenged for not accurately
OCR for page 3
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OCR for page 4
4
BRUCE R. GUILE
reflecting recent events in the U.S. manufacturing sector (Mishel, 1988),
there is no better long-te~ data series available for examining U.S. economic
output.
The story is slightly different with regard to employment by sector. Em-
ployment in the U.S. manufacturing sector has decreased as a percentage of
total U.S. employment, from 34 percent in 1950 to 19 percent in 1986. This
has occurred, however, as a result of growth in other sectors. The absolute
level of the manufacturing work force has fluctuated quite dramatically with
economic conditions, but it shows no clear trend similar to that in manufac-
tur~ng's share of total employment. The fact that the manufacturing sector's
share of a growing gross national product is steady while its contribution to
actual employment remains constant is consistent with long-term trends of
increasing labor productivity in manufacturing.
The diminishing share of manufacturing in total employment over the last
35 years reflects increases in employment share across a wide variety of
sectors. There have been small employment share increases in wholesale
trade and small decreases in agriculture, mining, transportation, and utilities.
There have been substantial increases in retail trade, business services, health
services, and government, mostly state and local government (which includes
education). Services-producing industries have been responsible for virtually
all of the job growth in the United States since 1972, and in 1986 they
employed over 70 percent of the work force.
The common belief that this shift in employment shares reflects a shift
from high-wage factory work to low-wage retail and food services work is
belied by a simple examination of the areas in which employment has grown.
Although it is true that there has been significant employment growth in
retail trade, there has also been substantial growth in business services, health
services, and government. Whereas compensation in the retail industry is
quite low relative to all-industry averages (64 percent of the All Domestic
Industry Average in 1983) compensation is much higher in business services
(87 percent), and health services and government are very close to the mean
(97 and 104 percent, respectively) (Moody, 19851. In contrast, manufacturing
was 118 percent in 1983. A recent report from the Committee on Science,
Engineering, and Public Policy of the National Academy of Sciences/National
Academy of Engineering/Institute of Medicine described the changes this
way (Cyert and Mowery, 1987, p. 1091:
[T]he characteristic form of structural change within this economy does not involve
a large net outflow of labor from manufacturing into nonmanufacturing employment;
rather, it reflects more rapid employment growth in industries in which average wage
rates currently are lower than in manufacturing. At the same time, however, the
occupational structure of the U.S. economy has shifted in an opposite direction, with
faster growth in higher-skill, higher-wage occupations.... Partly for this reason
the gap in average wages between manufacturing and rapidly growing sectors such
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SERVICES INDUSTRIES POLICY ISSUES
s
as business services (which include computer services and consulting) has been
shrinking over the past decade.... Many declining manufacturing industries for
example, textile, apparel, and leather products now pay wages that are low in
comparison with those paid by much of the services sector.
Although the relative shift in employment toward nonmanufacturing in-
dustries has probably been responsible for some slowing of the rate of growth
in real earnings in the United States, the effects of the shift must be interpreted
carefully. If the United States is becoming a nation of hamburger stands, it
is also becoming a nation of management consultants, doctors, software
designers, and international bankers.
In summary, the policy directions suggested by the changing structure of
the U.S. economy are ambiguous. On the one hand, it is quite clear that
manufacturing productivity growth is crucial to U. S . economic welfare. Man-
ufacturing is critical for obvious national security reasons and also because
manufacturing activities have traditionally represented the primary oppor-
tunity to add value in a manner that was easily exported.
On the other hand, although it is true that the relative role of manufacturing
and manufacturing employment in the U. S . economy is changing, the changes
are more complex than those implied by the phrase "deindustrialization."
Manufacturing activities have not disappeared from the United States, nor
does it seem likely that they will disappear in the near future. The composition
of employment has shifted toward nonmanufacturing industries but not ex-
clusively into employment that pays poorly. The chapters in this volume,
while not directed at questions about deindustrialization, do offer some im-
portant insights about the roles of both services and manufacturing industries
in the operation and productivity of the global economy.
THE ROLE AND IMPORTANCE OF SERVICES
Although many individuals think of a mass-producing manufacturer as the
prototypical large company, U.S. economic history might lead one to a
different conclusion. Railroad companies services companies emerged
during the mid- 1 800s as the first modern corporations. The business historian
Alfred Chandler (1977, p. 120) described railroads as follows:
They were the first to require a large number of salaried managers; the first to have
a central office operated by middle managers and commanded by top managers who
reported to a board of directors. They were the first American business enterprise
to build a large internal organizational structure with carefully defined lines of re-
sponsibility, authority, and field units.
It was not until the early 1900s that the managerial and financial systems
developed for managing railroads made their way into production operations
and, indeed, it was not until 1913 with Ford's innovation of the moving
assembly line that mass manufacturing, as well as the size and structure of
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6
BRUCE R. GUILE
manufacturing firms, took off. No single services industry today is as dom-
inant as the railroads were in their time, but communications firms, banks,
airlines, multiple-site retailers, and energy utilities are large, sophisticated
corporations with as much to contribute to national economic well-being as
large manufacturing firms.
In the opening chapter of this volume, James Brian Quinn examines the
role and character of services industries. The chapter begins by addressing
some common misperceptions about services: that they are low-value-added,
small-scale, and technologically unsophisticated industries. The chapter of-
fers evidence that services such as communications, finance, transportation,
and health care are large, capital-intensive industries responsible for com-
mercial application of some of the most sophisticated technologies available.
The main thrust of the chapter is an exploration of the ways in which tech-
nologies applied in services activities are changing the structure of domestic
and global competition in both goods and services industries. Quinn's analysis
of competitive structures the way production and distribution are organized
in different industries makes a persuasive case that services and manufac-
turing activities are inextricably interdependent and that many of the oppor-
tunities in global manufacturing operations arise from technologies applied
in services activities such as communications, transportation, and financial
management. Those points are enriched and extended in the chapters by
Ronald E. Kutscher and Faye Duchin.
The chapter by Kutscher on employment trends in services industries in
the United States focuses considerable attention on explanations for the rapid
growth of employment in producer services, services sold mostly to business
rather than to individual consumers. Using a framework from input-output
analysis, Kutscher estimates the growth in producer-services' output that
would have taken place between 1972 and 1985 had there been no change
in the structure of production. He finds that more than half of the growth in
output in producer services between 1972 and 1985 can be attributed to
changing business practices (changes in the structure of production). Pursuing
explanations for this change in business practice, Kutscher explores the "un-
bundling" hypothesis—that producer services have grown as a result of
manufacturers shifting in-house operations to external services providers.
Based on analysis of employment data in manufacturing and in producer
services, Kutscher concludes that "unbundling has been a very small factor
in the employment growth of producer services." He offers alternative ex-
planations for the rapid growth in producer services and closes his chapter
with a discussion of the sustainability of a services-based economy.
The chapter by Duchin approaches the role of services in the U. S . economy
from a fundamental level. Using input-output analysis, Duchin. explores the
requirements for manufactured goods in the production of services, the im-
portance of services inputs for manufacturing production, the captive pro-
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SERVICES INDUSTRIES POLICY ISSUES
7
auction of services by businesses, and the household production and purchases
of services. The analysis, like the chapters by Quinn and Kutscher, illustrates
the diversity of services activities and the degree of interdependence between
services and manufacturing. Duchin concludes that
The growth of the services sectors has been accompanied by significant demand for
construction, paper, transportation equipment, and various special-purpose capital
goods that are among the largest inputs (in value) to virtually all the services sectors.
The notion that services involve essentially people (and computers) turns out to be
an unrealistic basis for policy.
The chapters by Quinn, Kutscher, and Duchin illustrate that an important
economic and technological synergy exists between services and manufac-
turing; the services surrounding manufacturing are as much at the heart of
manufacturing productivity as is the introduction of new, more efficient
production machines. The information management surrounding manufac-
turing operations just-in-time inventory techniques, new approaches to quality
control, and systems for product delivery to market represents only some
of the services dimensions of manufacturing (see Quinn, 1988, for further
discussion). Recognition of the interdependence of manufacturing and ser-
vices, when combined with an understanding of the technological opportun-
ities inherent in services activities, leads naturally to an interest in the character
and level of productivity growth in services industries. In a very direct way,
the performance of services industries affects the performance of the entire
economy.
PRODUCTIVITY GROWTH IN SERVICES
Productivity growth statistics attempt to measure the performance of an
economy or industrial sector in increasing output per unit of resources used.
As John Kendrick and Jerome Mark explain in their chapters, productivity
has grown slowly in services industries such as hotels and motels (an average
of 0.4 percent per year between 1973 and 1985) and intercity trucking (0.4
percent per year between 1973 and 19851. In other services industries the
rate of growth in productivity has been rapid. Productivity growth in tele-
phone communications services averaged 6.2 percent per year between 1973
and 1985; in air transportation the average increase was 3.9 percent, and in
gasoline service stations the average annual increase was 3.2 percent. In
contrast the average annual rate of increase for all manufacturing industries
over the period 1948-1985 was 2.7 percent.
In addition to reviewing different methods of measuring productivity growth
Kendrick addresses policy options to increase productivity in services—
policies that include supporting research and development for services, im-
proving worker skills, or encouraging investment to bring the newest gen-
eration of technology into the workplace. Chapters in the companion volume
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8
BRUCE R. GUILE
(Guile and Quinn, 1988), without directly addressing the productivity of
industrial sectors, illustrate the role that technological advance can play in
the productivity growth of sectors such as communications, automotive re-
pair, and distribution (Davis, 1988; Fellowes and Frey, 1988; Larson, 19881.
Stephen S. Roach, in his chapter on investment and productivity growth
in services, examines the problems of low productivity growth in services
industries. According to his analysis the investment in information technol-
ogies by many services industries has been substantial over the past 20 years.
Since 1965 services-producing industries have consistently been responsible
for more than 50 percent of national capital spending, and an increasingly
large share of the capital stock of services industries is in information tech-
nology. The puzzle remains, however, as to why this substantial investment
in information technology has not produced more rapid productivity growth
in services. Roach offers several possible explanations, including poor man-
agement of technology by services businesses.
One~issue that becomes clear from the chapters by Roach and Kendrick
is that the ability to grapple with policy questions regarding productivity in
the services industry is badly hampered by serious definitional and mea-
surement problems. The chapter by Mark, therefore, addresses a central issue
for development of policies about services industries: data collection and
measurement.
In manufacturing industries, productivity has a long history of measure-
ment based on labor hours, capital expenditures, materials costs, and outputs.
Accurate measurement of the inputs and outputs in manufacturing is difficult,
but it pales in comparison with the measurement problems for services in-
dustries. For example, how can one measure the productivity of the real
estate equity investment department of a financial institution? Is the output
of the department represented by the number of investments, the dollar value
invested, or the return on investment (something that is not usually known
until several years after the investment is made)? Are the typical measured
inputs space, equipment, and labor hours consumed by the department in
doing its business adequate descriptors of the "production" of quality
investments? Measures that deal with physical inputs and outputs may show
the impact of changing technology (office automation, for example), but they
do not relate well to meaningful definitions of productivity in the services
industry of real estate investments.
In short, the character of production of many services makes the mea-
surement of inputs and outputs problematic. Additionally, technological changes
in products and process, changes in the organization of production, and
national data-collection efforts that have historically been weak in the services
area also act to confound meaningful measurement of productivity growth
in services (see Helfand et al., 1984, and National Research Council, 19861.
What is encouraging about the chapter by Mark is the degree to which the
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SERVICES INDUSTRIES POLICYISSUES
9
Bureau of Labor Statistics has demonstrated that, with sufficient resources
and attention to detail, it is possible to measure productivity growth reliably
even in some of the most elusive services industries.
Much work still needs to be done in developing better methods for un-
derstanding productivity growth and structural change in the economy. The
relatively simple and important concept of sector-specific productivity growth
often flounders on difficult-to-measure inputs and outputs and on changes in
technology or business practices. As the chapters by Mark, Kendrick, and
Roach illustrate, existing measures of productivity growth in services provide
a less than complete understanding of a number of important questions. Why
has the return on investment in information technology by services businesses
(as measured by productivity growth statistics) been so low, and, if it is
really low, why have firms continued to invest? How does one understand
the performance of U.S. producers in relation to that of foreign producers
in improving the productivity of software production? Does the wide variation
in productivity growth rates in services industries reflect real differences in
rates of efficiency improvement or is it an outcome of some aspect of mea-
surement or interpretation? A particular problem from a microeconomic or
trade policy perspective is that sector-specific measures of productivity per-
formance do not reveal much about the character of interdependence between
industries or about the way technological change or trade affects the structure
of production.
SERVICES TRADE
Services industries are becoming globalized in the same manner as man-
ufacturing industries and for the same reasons: labor cost differentials, market
access considerations, capital mobility, and growing dispersion of intellectual
resources. Indeed, technological advance has made some services indus-
tries finance, for example a paradigm of global industries. In addition to
being global industries in their own right, some services industries play central
roles in the globalization of the production and distribution of goods; services
industries operate the most sophisticated and complex real-time communi-
cations systems, and they provide the financial lifeblood of the entire global
economy. The long-term vision of industrial evolution provided in the chapter
by Frederick W. Smith is an example of services both in international trade
and as a facilitator of economic globalization. The concept of a just-in-time
global economy an economy in which communications and~transportation
technology allow the reduction of manufacturing, retail, and wholesale in-
ventories is a remarkably simple yet reasonable extension of trends that
have been with us since the invention of the telegraph and the rise of the
railroad.
Services industries depend for their vitality on a broad spectrum of intel-
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10
BRUCE R. GUILE
lectual resources. The low end of the spectrum is unskilled labor (e.g., the
routine data entry operator), but the other end of services employment can
depend on significant intellectual achievement. Some services industries,
such as software development for computers, engineering, systems design
and management, and research and development, draw on the highest level
of intellectual resources. The development of effective global communica-
tions, combined with the growth abroad of intellectual capabilities essential
to services industries, has facilitated the emergence of services providers in
Asia and Europe that rival those in the United States in their ability to design,
manage, and operate complex systems. For example, much engineering de-
sign for U.S. engineering construction firms is now done abroad, in Europe,
Korea, Taiwan, and elsewhere. Software is another example. Increasingly,
it is becoming a target for other nations interested in building a high-
technology export industry. The People's Republic of China and India are
good examples, and they are skilled in this area. Not only is their relevant
labor less expensive, it is of high quality. It is noteworthy that, at the other
end of the intellectual spectrum, the sources of some routine services tasks
such as data entry are also being established across national boundaries.
Even if one takes into account the fact that current services trade has most
likely been underestimated in official figures, services trade is still small
relative to merchandise trade: in 1984 when U.S. merchandise exports and
imports were $218 billion and $341 billion, respectively, the very highest
estimates of U.S. services exports and imports were $91 billion and $74
billion, respectively (Office of Technology Assessment, 1986, p. 391. None-
theless, services trade is growing in the world economy and often represents
economic activity in the most technologically advanced and the highest wage
sectors. Growing U.S. concern over trade, combined with the immediacy of
the next round of General Agreement on Tariffs and Trade (GATT) nego-
tiations, has generated a wealth of study and insight into trade in services
(American Enterprise Institute and the Coalition of Services Industries, 1987;
Congressional Budget Office, 1987; Office of Technology Assessment, 1986;
Stalson, 1985; U.S. Trade Representative, 19841. The chapter by Rauf Gon-
enc~ addresses changes in the structure of both national and international
services industries and the implications of those changes for services trade.
Unlike manufactured goods, the heterogeneity of services creates problems
even at the level of simply understanding what constitutes services trade;
tourism by foreigners in the United States, travel or shipment on U. S . carriers
by foreign travelers and shippers, distribution of U.S. films and recorded
music overseas, and international management consulting are all components
of services trade. As the chapter by Gonenc~ shows, the most striking thing
about services trade is the wide range of political and economic issues that
affect services trade. A few examples will suffice to make the point.
Services such as finance, transportation, and communications are heavily
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SERVICES I1!lDUS TRIES POLICYISSUES
1
1
regulated in most countries. As a result, despite international trends toward
deregulation of services (as discussed by Gonenc~), trade in services is often
a clash between competing national regulatory systems. The discussion by
Frederick W. Smith of international air transport regulation is a case in point.
In contrast to manufacturing, the primary focus of trade negotiations for such
services is the elimination of nontariff barriers.
International trade in services such as motion pictures and software requires
effective international regimes for dealing with copyrights, trademarks, and
patents. The issues of intellectual property protection are foremost and central
to the trade policy agendas of most industrialized nations. Both individual
services industries and national interests would most likely be well served
by stronger international regimes to prevent expropriation of such intellectual
property (U.S. International Trade Commission, 19881.
Trade in some services can be greatly affected by laws inhibiting the
movement of people across national boundaries. Many "top-of-the-line"
services are affected. Engineering, law, and consulting often confront laws
restricting the establishment of foreign offices or the licensing requirements
of professional practice.
Growing trade in services also raises complex issues of national compet-
itiveness in a global marketplace. On the one hand, U.S. consumers pre-
sumably benefit from fierce competition among services producers, whether
those producers are based in the United States or in other nations. Also,
provision of services by foreign-based producers may not have the same
negative employment impacts on the U.S. economy as importing manufac-
tured products. Transportation from Boston to Los Angeles can be provided
only in the United States, whatever the ownership of the airline, and the
demand for fast food can also be satisfied only locally.
On the other hand, increasing foreign direct investment in the United States
in services (ownership of domestic businesses by individuals and companies
from other nations; see data and discussion in the chapter by Quinn) raises
complex questions about the U.S. national interest in industrial evolution.
As discussed in the chapter by Richard W. Wright and Gunter A. Pauli, the
growing presence of Japanese financial services institutions in U.S. and
European markets brings forth national concerns about sovereign control of
national financial markets and the sustainability of domestically based fi-
nancial institutions. The same set of concerns would apply, presumably,
were the U.S. air transport market to become dominated by foreign carriers.
Few large industrialized nations are likely to embrace a dominant foreign-
based presence in domestic transportation, communications, or financial mar-
kets. The national security concerns are obvious, but the economic security
questions are just starting to emerge for the United States.
There is widespread agreement that some basic services strongly affect
overall comparative economic performance. Electric utilities, health care,
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12
BRUCER.GUILE
education, communications, transportation, and financial services are central
elements of national economic development and welfare. Most important,
however, from the point of view of international competition, they are the
enabling industries industries that, if efficiently provided, allow the func-
tioning of an industrialized economy. They are prime targets for efficiency
improvements in industrialized nations.
In the United States, the road, airport, and waste disposal systems are
inadequate to meet current and projected demand (Herman and Ausubel,
1988) and are obvious targets for large-scale infrastructure development and
deployment programs that would be of significant value in long-term U.S.
economic performance. The difficult policy questions revolve around how a
development is best paid for and which investment is most important now.
Can some large services infrastructure investments, such as communications
systems, airports, air traffic control systems, or waste treatment, be handled
adequately by the private sector? If services infrastructures are provided by
private investment, a new question arises: Is it desirable (or even possible)
to distinguish between domestic and foreign capital investments in services
infrastructures? Additionally, there are a number of unanswered questions
about the strategic, long-term commercial importance of a strong techno-
logical or marketplace position in certain services industries.
In a global manufacturing business, success may come as much from the
development and operation of a component ordering and control system as
from efficient assembly operations. Although the logic is clear from the
perspective of a corporation, the argument has yet to be worked out or agreed
on from a national perspective; there is no obvious path between open com-
petition among services in the international market and the desire for at least
loose national control of certain core services. In short, aggressive interna-
tional market competition in services industries such as finance, transpor-
tation, and communications is an important new reality in the global
marketplace, one that many nations may be ill prepared to accept or adapt
to.
KEY POLICY ISSUES AND DIRECTIONS
FOR FUTURE POLICY RESEARCH
The chapter by James Brian Quinn and Thomas L. Doorley addresses the
central policy initiatives needed to support the effective use of technology
in services industries. In particular, the chapter focuses on (1) macroeconomic
and tax policies, (2) policies for investment (public, private, or mixed in-
vestment) in services infrastructures, (3) changes in the form of economic
regulation, (4) human resources development policies, and (~) recognition
of the interdependence of services and manufacturing in trade negotiations.
The chapter integrates issues of productivity, investment, regulation, and
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SERVICES INDUSTRIES POLICY ISSUES
13
trade in services to argue for more balanced attention to the role and im-
portance of services industries in policy agendas.
Although individual chapters suggest a number of areas for further policy
research, at least two important policy questions arise from consideration of
the volume as a whole. First, the volume illustrates the depth and complexity
of questions about the role of different services sectors, the effect of tech-
nological change on services, the interaction of services and manufacturing,
and the impact of traded services on a national economy. The policy debates
concerning U.S. competitiveness rarely reflect much understanding of the
role and importance of services. This problem derives not only from the
complex character of the issues but also from the weaknesses of available
measures of U.S. economic structural change. One of the primary long-term
policy challenges, therefore, is to pursue a more effective and agreed on
analytical language for discussing technological and economic structural change
and the implications of those changes for national policy.
Second, the chapters in this volume argue in favor of a serious and wide-
ranging reconsideration of the role of the federal government in fostering
research, development, and engineering related to services industries. It is
clear that U.S. services industries need to remain abreast of, and be prepared
to introduce, new technology from whatever source it may be available.
Services firms have to increase their capabilities to conduct and equally
important to exploit research and development. In recent years, concerns
over the technological base of U. S. manufacturing industries have stimulated
new forms of organization of research and development in manufacturing
industries. Some of these mechanisms have been established in the private
sector as a means of bringing to bear a critical mass of intellectual and
financial capital in commercially strategic areas. The Microelectronics and
Computer Technology Corporation in Austin, Texas, is a good example.
Other important actions have involved the federal government. The Engi-
neering Research Centers, established by the National Science Foundation,
and Sematech (the semiconductor industry's partnership with the federal
government) are examples of the trend.
In some services industries, joint efforts to support research and devel-
opment are well established; the Electric Power Research Institute and the
Gas Research Institute are good examples.Whether the technological base
of a services industry can best be organized within single companies or as
cooperative ventures will vary with the particular industry and the character
of technological opportunities. It is worth further study, however, as to
whether the federal government could play a more catalytic or supportive
role in strengthening the national research and development base focused on
services industries.
Finally, the political apparatus has not been excited much about the outlook
for services, and that constitutes the primary policy challenge presented by
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14
BRUCE R. GUILE
this volume: to inform those responsible for national policy of the crucial
issues facing the services industries and of the central role of services in-
dustr~es in maintaining the competitiveness of the U.S. economy.
ACKNOWLEDGMENTS
I would like to thank Robert M. White, president of the National Academy
of Engineering, for his early insights about the policy questions raised by
growing services industries and Harvey Brooks and Jesse H. Ausubel for
their helpful comments on earlier drafts of this introduction to the volume.
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_~ ~ 5 Ll11~ ~ ~lll~ll~a ~ ~ laud
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Representative terms from entire chapter:
productivity growth
