Technological Change and Service Industry Market Share

Abstract

This study uses panel GMM estimation to investigate the role of technologicalcompetence in the international competitiveness of service industries within OECDcountries. Relative prices, economies of scale, diffusion of IT, human capital, R&Dexpenditure and investment in capital formation are used as explanatory variables inregression of data for twenty-one OECD countries during the 2001~07 period. Someof the major findings of the study can be summarized as follows: First, relative priceshave a limited impact on international competitiveness while technological competenceas measured by R&D expenditure and diffusion of IT plays an important role ininternational service industry competitiveness. Specifically, R&D expenditure has apositive and significant impact on international competitiveness in transportation andtelecommunications services while IT diffusion has a positive impact on internationalcompetitiveness in finance, insurance and business services. Second, it is shown thatother variables, including human capital and investment in machines and equipment,also contribute to international competitiveness. Third, the empirical results confirmthe high degree of heterogeneity in the service sector; the impact of technologicalcompetence on international competitiveness differs among the service industries.