Geography Producer Services
Richard Shearmur
  • LAST REVIEWED: 26 February 2013
  • LAST MODIFIED: 26 February 2013
  • DOI: 10.1093/obo/9780199874002-0070


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.

General Overviews

The nature of producer services cannot be fully understood without considering wider changes that have occurred in the economy since the 1970s. Bell 1973 was among the first studies to describe the rising importance of information, knowledge, and high-order service functions in the economy. However, not all analysts agreed, and the arguments in Cohen and Zysman 1987—that the capacity to produce goods remains important to national economies—still resonate in the early 21st century. O’Farrell, et al. 1993 discusses the extent to which the rise in demand for business services relates to the changing structure of manufacturing firms. Moriset and Malecki 2009, for its part, provides a discussion of the impact that the rise in telecommunications is having on the organization and geography of economic activity, as well as on services in particular.

  • Bell, Daniel. The Coming of Post-industrial Society: A Venture in Social Forecasting. New York: Basic Books, 1973.

    When writing this seminal book in 1973, Bell was among the first to predict the increasing importance of services and information in the economy and the concomitant decline of goods-producing industries. Republished as a special anniversary edition in 1999.

  • Cohen, Stephen S., and John Zysman. Manufacturing Matters: The Myth of the Post-industrial Economy. New York: Basic Books, 1987.

    A counterargument to Bell 1973, in which the authors argue that manufacturing will remain important for Western economies and that efforts should be made to preserve manufacturing functions.

  • Moriset, Bruno, and Edward J. Malecki. “Organization versus Space: The Paradoxical Geographies of the Digital Economy.” Geography Compass 3.1 (2009): 256–274.

    DOI: 10.1111/j.1749-8198.2008.00203.x

    A discussion of the impact that the Internet and other telecommunication technologies are having on the geography of economic activity. Although pitched at a general level, one of the examples used in this paper is that of telecommunication-mediated services. The article also discusses the changes brought about in the Christallerian urban hierarchy, a hierarchy in which high-order producer services occupy the most central place. Available online for purchase or by subscription.

  • O’Farrell, P. N., L. A. R. Moffat, and D. M. W. N. Hitchens. “Manufacturing Demand for Business Services in a Core and Peripheral Region: Does Flexible Production Imply Vertical Disintegration of Business Services?” Regional Studies 27.5 (1993): 385–400.

    DOI: 10.1080/00343409312331347645

    A discussion of the various factors that may have led to the increasing demand for producer services. The authors’ empirical analysis shows that, for their particular case, increasing demand, rather than outsourcing, is a major contributor. Available online for purchase or by subscription.

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