For services firms, small can be beautiful
Conventional wisdom is pessimistic about the prospects for services-led development, leading to worries about premature deindustrialisation. This column argues that the services sector deserves more credit for helping drive economic transformation than it generally receives. Using firm-level data from 20 developing economies, the authors find that while services establishments are smaller than manufacturing establishments, this matters less for their productivity. Services firms can scale up without sizing up through investments in human and other more intangible forms of capital can leverage the diffusion of digital technologies.