Service-oriented Structural Transformation of Manufacturing Firms: An analysis using panel data for Japanese firms

This study uses Japanese firm panel data to examine trends in manufacturing firms’ shift toward service-oriented businesses—referred to as “Manufacturing X.” A distinguishing feature of this study is that it analyzes not only overall non-manufacturing businesses but also narrowly defined service businesses. We find that manufacturing firms’ share of non-manufacturing sales has been steadily increasing. If the current trend continues, the share of non-manufacturing sales among these firms is projected to reach 16.5% by 2040. Both the proportion of firms engaged in and sales share of narrowly defined services such as machine repair, professional services, and business services are rising, indicating a gradual shift in manufacturers’ service businesses. Expanding narrowly defined service sales is positively associated with sales growth and profitability.

This is the English version of the Japanese Discussion Paper (25-J-022) with some additional information and changes.