External Stimulation Accelerating A Structural Shift To Service-Oriented Industry- A Cross Country Comparison | Masakazu Katsumoto & Chihiro Watanabe

Under the paradigm shift from an industrial society to an information society, that emerged in the 1990s, a structural shift from a manufacturing-based industrial structure to a service-oriented industrial structure has become crucial for a nation?s competitiveness. While it is generally postulated that a shift to a service-oriented industrial structure is a consequence of a virtuous cycle between an increase in income level leading to a qualitative change in demand and increased service industry productivity, historical evidence on national growth around the world reveals the fact that an increase in income level does not necessarily induce a shift to a service-oriented industrial structure as expected. Given the above postulate and a virtuous cycle, the solution of this contradiction is a crucial subject of services management. This paper attempts to identify the source of the contradiction regarding the above postulate. On the basis of an empirical analysis of the growth trend, sectoral structure and income level of 100 countries over the last two decades, a certain threshold was found to exist in the level of income for inducing qualitative change in demand that spurs a shift to a service-oriented industrial structure. In addition, it was demonstrated that an increase in income to a level higher than the threshold cannot be expected solely from an increase in manufacturing industry productivity. External stimulation that includes trade liberalization, deregulation and technological innovation for maximizing the vitality of both domestic and foreign investment is indispensable.