ABSTRACT
This chapter focuses on the factors which determine the mode of operation chosen by goods-producing and service-producing firms in the domestic and international markets. It starts from a premise that goods and services do indeed differ in several important respects. It shows that, when viewed by the market, all transactions involving goods have a significant service content. The chapter discusses service characteristics and their impact on the institutional options available to producers of goods and of services. It compares between goods and services are used to emphasize both the differences and similarities between the two types of transactions. Tangible and intangible goods are thus distinguished from services in one very important respect: while all goods can be produced in isolation, the production and absorption of services require some form of interaction between producer and user. The chapter concludes by arguing that it is the service characteristics which determine the entry and operating policies of both goods producers and service providers.
