Magazine article Journal of Services Research

The Paradox of a Service-Oriented Economy for Sustainability: Co-Evolution between Innovation and Resources Effectuation by a Global Complement

Magazine article Journal of Services Research

The Paradox of a Service-Oriented Economy for Sustainability: Co-Evolution between Innovation and Resources Effectuation by a Global Complement

Article excerpt

INTRODUCTION

In line with the increasing constraints in the resources and environmental capacity together with the increasing preference in shifting from materials to services, the share of service industry has been increasing substantially in industrialized countries corresponding to their industrial development. A shift to a matured economy in these countries has accelerated such a trend leading to a service-oriented economy. Figure 1 illustrates the share of the output in Japan's industry over the period of 1955-2005 together with the trend in the international oil prices in the same period.

Looking at the figure abovewe note that the share of the service industry has shown significant increase particularly after the first energy crisis in 1973 in Japan in which securing the energy resources was the Achilles' heel in its sustainable growth. A service -oriented economy is really expected to play a significant role in relieving such constraints on an economy by means of technology/information substitution for constrained production factors such as energy (Chen, 1994, Watanabe et al., 2004).

However, contrary to such an expectation, the dramatic increase in crude oil prices that emerged in the beginning of the 2000s has revealed the paradox of a service-oriented economy. Japan has been recognized for its notable energy efficiency improvement by means of technology substitution for energy that induced vigorous industry R&D leading to a high-technology miracle in an industrial society (Watanabe, 1992; 1999). However, its efforts to shift to a service-oriented economy corresponding to a paradigm shift to an information society have produced opposite results by increasing industry's unit energy consumption and decreasing price elasticity to energy consumption.

Figure 2 illustrates the trend in the unit energy consumption in Japan's manufacturing industry over the period of 1965-2005. Figure 2 demonstrates a conspicuous energy efficiency improvement in Japan's manufacturing industry based on its technology substitution for energy driven by the energy crises in the 1970s (Watanabe, 1999). However, such a conspicuous accomplishment has terminated in the beginning of the 1990s and changed to an increasing trend. While this timing corresponds to the timing of the oil glut circumstances demonstrated in Figure 1, it also corresponds to the emergence of an information society and subsequent advancement of a service-oriented economy. The multiplier effects of such circumstances led us to overdependency on information technology (IT) equipments which have become energy dependent as the service industry has been seeking to improve their facilities by providing information networks, flexible logistics networks, 24-hour air conditioning, highly equipped design studios, and worldwide conference systems. Also it is notable that the energy consumption has started rising corresponding to the production and the use of the information equipments such as large screens, high performance LSI, full automation system, prompt start-up equipment.

The above phenomena reveal a paradox with respect to a serviceoriented economy for sustainability. Furthermore, while the advancement of IT is expected to lead to a globalized economy, it also shows the result of increasing constraints by means of less effectuation of energy use. Supported by the advancement of IT, industrialized countries are now beginning to outsource their manufacturing production processes including assembly and fabrication processes to industrializing countries because of lower labour costs. Taking an example from the computer industry, sales and after-sales service sectors are providing greater profitability than assembly and fabrication. Companies in industrialized countries are therefore transferring their low-profit assembly and fabrication sectors abroad or outsourcing them, focusing their resources instead on development. The White Paper on Energy published by Japan's METI1 (2005) revealed that given such outsourcing proceeds from Japan to neighboring countries, energy consumption will increase to more than 6 times higher than the state when the production was conducted in Japan. …

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