Our study aims to investigate the determinants of international competitiveness and international specialization in services, using OECD service trade data. Real exchange rates, world demand, economies of scale, diffusion of IT, human capital, R&D expenditure and institutional variables are introduced as explanatory variables in regressions for 29 OECO countries over $1996{sim}2003$. Some of major findings from the study can be summarized as follows. First, economies of scale play important role in transport and business services. Second, the index of freedom to trade measured by Faster Institute has a positive and significant impact on international competitiveness in telecommunication, finance and insurance and business services. Third, IT provides favorable condition to build international competitiveness in finance and insurance and business services. Fourth, R&D expenditure contributes to the amelioration of international competitiveness in transport services, while investment in new equipments contributes to increasing the competitiveness in telecommunication services. Thus, our results show the importance of the industrial base for developing a competitive service economy.