Columbia International Affairs Online: Working Papers

CIAO DATE: 12/2008

The Services Transformation and IT Network Regulation

Kenji Erik Kushida, John Zysman

June 2008

Berkeley Roundtable on the International Economy


There is currently a fundamental transformation of services, a transformation central to the growth of productivity and competition in the global economy. This transformation, a response to commodification generated by decomposition of production and intensified competition in global markets, is driven by developments in IT tools, the uses they are being put to, and the networks they run on. The service transformation is changing how firms add value, affecting the underlying economic activity in countries around the world.

This paper introduces the notion of the services transformation, placing it in the historical context of production and competition. Second, it traces the advent of the Internet as a critical building block of this transformation. Third, we consider national strategies for capturing value in this new era. The experiences of Japan and Korea, successful in deploying high-speed IT networks, but facing unexpected challenges in using them to capture value, highlight several features of the services transformation.