This paper documents the comparative productivity performance of the United States and Britain since 1870, showing the importance of developments in services. We identify the transition in market services from customised, low-volume, high-margin business organised on a network basis to standardised, high-volume, low-margin business with hierarchical management, as a key factor. A model of the interaction between technology, organisation and economic performance is then provided, focusing on the transition from networks to hierarchies. Four general lessons are drawn: (1) developments in services must be analysed if the major changes in comparative productivity performance among nations are to be understood fully; (2) different technologies and organisational forms can co-exist efficiently; (3) technological change can cause difficulties of adjustment in technology-using sectors if it is not suited to the social capabilities of the society; (4) reversal of technological trends can lead to reversal of comparative productivity performance
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