(ICIO) tables, but it would also need to identify foreign or domestic ownership for each commodity/industry. While such a framework is not currently available, initiatives in this direction are under way by the U.S. Bureau of Economic Analysis (BEA) and the OECD (Fetzer and Strassner 2015; OECD 2015). In both cases, the proposed approach is to link existing supply-use tables to ownership and trade data—such as OECD ICIO to the Activity of Multinational Enterprises (AMNE) Database, or BEA inputoutput accounts to BEA surveys and U.S. Internal Revenue Service Statistics of Income data.

## **_Services as in-house inputs in global value chains_**

When services inputs are supplied in-house, value-added analysis does not capture their contribution to GVCs. Additional information is needed to identify these services activities within each production process.

One way to address this issue is to consider business functions, in order to distinguish between the primary or core activity of the firm and support functions such as R&D, sales, marketing, or information technology services. But statistics on business functions have only recently started to be collected in some national surveys (Sturgeon et al. 2013).<sup>10</sup> Alternatively, labor force surveys can be used to identify business functions by matching occupation classifications to business functions (Timmer, Stehrer, and de Vries 2015). Each industry is assigned one business function to describe its core activity, which usually covers occupations directly related to the production process. All other business functions are classified as support activities (or secondary business functions) and can be regarded as services activities if they would be classified as services if outsourced. This approach may supplement the usual trade-in-value-added analysis, providing a sense of the role of in-house services in GVCs.<sup>11</sup> While it is theoretically possible to determine a single core function per industry, it can be difficult in practice to establish what is not a support function. Even if it were feasible to distinguish between tasks that would be services if they had taken place at arm’s length (such as book-keeping) and other tasks that are intrinsically manufacturing or agricultural in nature (such as wood processing), such distinctions slide on a slippery slope and raise the question: What is not a service? Ultimately, almost any task can be conceived of as an arm’s length service. For example, one could either directly employ a worker in the horticultural sector or buy “fruit-picking” services from an individual or a firm. So, this deconstruction of the firm into constituent tasks could reduce each firm into a bundle of services.

# **The emerging patterns of services in global value chains**

This section presents some stylized facts about the increasing role of services in GVCs—first in aggregate and then across countries and industries. It then discusses why this might be happening. The evidence is obtained by computing the value-added measures described in the previous section using the OECD TiVA

> 10 Examples include the 2010 National Organizations Survey in the United States (Brown, Sturgeon, and Lane 2014) and two EUROSTAT surveys on the international sourcing of business functions by enterprises (Nielsen 2008).

> 11 Statistics on business functions based on labor force surveys should be interpreted carefully since comparability across countries may be affected by statistical conventions in the construction of input-output tables. For example, data collected at the enterprise level and the establishment level could yield different information for identical processes on what is provided in-house and what is outsourced.

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