Columbia International Affairs Online: Working Papers

CIAO DATE: 07/2010

The Digital Transformation of Services: From Economic Sinkhole to Productivity Driver

John Zysman, Stuart Feldman, Jonathan Murray, Niels Christian Nielsen, Kenji Kushida

April 2010

Berkeley Roundtable on the International Economy


A fundamental transformation of services is underway, driven by developments in information and communications technology (ICT) tools, the uses to which they are being put, and the networks on which they run. Services were once considered a sinkhole of the economy, immune to significant technological or organizational productivity increases. Now, they are widely recognized as a source of productivity growth and dynamism in the economy that is changing the structure of employment, the division of labor, and the character of work and its location. Yet, the actual character of this transformation is often obscured by the increase in jobs labeled as services and by a focus on the digital technologies that, certainly, are facilitating this transformation. This transformation, central to the growth of productivity and competition in the economy, poses basic policy and business choices.