Producer Services

Richard Shearmur

in Geography

ISBN: 9780199874002
Published online February 2013 | | DOI:
Producer Services

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Prior to the 1970s, some producer services—those primarily selling services to business and government rather than to households—were being dismissed as not important because they were considered nonproductive and parasitical; those that were not being dismissed were considered to be a minor item in some farsighted views of how Western society was evolving. In the crisis-laden context of the 1970s and early 1980s, however, researchers began focusing on new economic activities with growth potential—producer services, in particular. This partly reflected the desire to identify solutions to the crisis but also partly reflected the changing nature of production processes. Why did producer services become important? From an economic system in which large, vertically integrated firms dominated markets, a new system was emerging under which companies tended to focus on their core competencies and to outsource functions such as legal and accounting work. Thus, producer services—understood initially as intermediate services delivered to final producers of goods—became clearly identifiable economic activities and have been among the fastest-growing economic sectors from the 1970s to the early 21st century. Outsourcing was not the only factor leading to producer services growth; demand for these services was also increasing rapidly. The collection, manipulation, and strategic use of information increased in importance during the 1980s and 1990s. All sectors, not just goods producers, began to be recognized as users of producer services. Hence, since the mid-1990s, a shift has occurred in the vocabulary; producer services have increasingly been referred to as “knowledge-intensive business services” (KIBS). Another key development in the beginning of the 21st century has been the mass diffusion and ubiquity of telecommunication technologies, which led to a new type of service: telemediated services. Telemediated services are service functions (that is, activities that take place within a sector or a firm) that can be delivered across telecommunications networks and that can therefore be outsourced and relocated. Producer services firms have seized the opportunity to outsource and subcontract some of their own functions, just as manufacturers have been doing since the 1970s. The very categories of high-order producer services or knowledge-intensive business services are being reconsidered. The end services still exist, but such services are no longer necessarily produced in one place, or even by one company. The vendor of the service is at the end of a value chain that can stretch across many locations and that coordinates many service functions, some of which are standardized and routine, others of which are complex and customized. The geography of high-order producer services then becomes the geography of networks of functions and flows across these networks. These differ in one important respect from similar networks in the manufacturing sector: many service functions can be delivered electronically, thus obviating the time and transport dimensions. However, other problems, such as cultural differences, effectiveness of communication, and real-time coordination, are more pressing across service value chains than across the manufacturing sector.

Article.  8329 words. 

Subjects: Earth Sciences and Geography ; Human Geography

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