Physical proximity is a great advantage to understand the real local problems. Example: It is very tough for US companies serve Chinese or Russian markets, as the cultures are so different and local problems quite different to problems in US - or Finland. It depends on the category and domain ... but even gaming preferences are quite different in different regions. Very few hit games that work everywhere - the one area where we Finns really rock the world (Angry Birds, Clash of Clans etc.)
The author agrees on this. It, naturally, is much more valuable for a nation to produce these companies themselves and get sometimes access to multiple revenue streams, and subsidiaries rarely buy companies and enrich the nearby ecosystem through that.
I don't think the internal service economy really increases a nation's value relative to other nations. If I buy a t-shirt from my neighbor and he repays by cleaning my house ... not really that scalable I think.
A key requirement IMHO for a functional service economy is high enough differences in salaries (so that there are people who can afford to buy services in scale) and low-cost workers. In Finland, and broader in Nordics, we don't have either.