ABSTRACT
This chapter examines the effect the use of production-orientated services has on the performance of the user firm and/or on the growth of the economy. It discusses the forms and determinants of extemalization of service activities from a micro-economic perspective. Historically demand for producer services was principally composed of such traditional services as distribution, transport, and financing. The resort to external services depends not only on structural changes on the part of the enterprises requiring them, but also on the supply of producer services. Service activities may also be externalized with the aim of increasing flexibility in the use of the labour force. The analysis carried out by Green of the demand for producer services in the European Community was restricted to the demand from manufacturing industry. Services procured externally should be summarized in significant groups and should be shown within the framework of input relations.
