Technology, Organisation and Productivity Performance in Services: Lessons from Britain and the United States, 1870-1990

We document comparative productivity performance since 1870, showing the importance of services for US overtaking of Britain. 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, is identified 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. We show that different technologies and organisational forms can co-exist efficiently and that technological change can cause difficulties of adjustment if it is not suited to the social capabilities of the society.