Abstract
In this second chapter, we develop a “Framework of Services Offshoring”, which contains a thorough analysis of the classification and drivers of services offshoring. The classification, in Sect. 2.1, examines how services offshoring is defined, which forms it can take, and which service activities are involved. First, we compare and contrast outsourcing and offshoring before deriving our own working definition of services offshoring. Second, we focus on the service part of services offshoring, defining services and describing the implications of their new tradability. We also classify services trade and the relevant service activities. Third, we focus on the offshoring part of services offshoring and discuss the make-or-buy decision in efficiency-based, resource-based, and transaction costs-based theories of firms. Section 2.2 identifies the main drivers of services offshoring. We first describe changes in the global environment, namely developments in ICTs as well as multilateral and regional liberalization of trade in services. We then discuss market-oriented, cost-oriented, and procurement-oriented services offshoring motives of firms, also including newer developments. Finally, we focus on developments in the destination countries, namely the availability of human capital, the presence of multinational companies, and the liberalization of service sectors.
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- 1.
Theoretically, one could also imagine a firm that previously outsourced to a domestic supplier and instead builds a subsidiary abroad (from 2 to 3). Practically, however, this might rarely be the case, as the foreign subsidiary requires internal knowledge about processes and services that are no longer performed in-house.
- 2.
The Manual conforms with and explicitly relates to the SNA 1993 and the fifth edition of the IMF's Balance of Payments Manual.
- 3.
Sectors within the classification of the German Federal Statistical Office: 45, 47–53, 56, 58, 69–71.
- 4.
Sectors within the classification of the German Federal Statistical Office: 63–68.
- 5.
Besides the provision of packaged (non-customized) software, non-specific computer training courses are excluded from computer services, as the first is classified as goods and the latter belongs to other personal, cultural, and recreational services. The download of software via the internet was being discussed during the preparation of the Manual.
- 6.
Mahoney and Pandian (1992) also outline that unique capabilities in the strategic management literature “are important sources of heterogeneity that may result in sustained competitive advantage” (Mahoney and Pandian, 1992, p. 365).
- 7.
According to Williamson (2000), four levels of social analysis can be distinguished, namely the social theory at the first level, the property rights theory at the second level, the TAC-based approach at the third level, and the principal-agent-theory at the fourth level. Our study is largely interested in the TAC-based approach, which extends the informal rules of the first level (e.g., sanctions, customs, traditions, codes of conduct) and formal rules of the second level (e.g., constitutions, laws, property rights) by also integrating contractual relationships (Williamson 2000).
- 8.
Williamson rejects the neoclassical model, where competition promotes efficiency on product and capital markets by squeezing inefficient firms out of the markets.
- 9.
Incomplete contracts have been used in several models to explain the make-or-buy decision of a firm (e.g., Antràs 2003). Among these, Ethier (1986) stresses the aspect of information asymmetries between firms, that make it difficult for firms to control the amount of research endeavours of the adverse party and to formulate an incentive-compatible contract. Besides, the required quality is difficult to integrate into a contract.
- 10.
The introductory notes on the following two pages have been taken and modified from Milberg and Schöller (2008).
- 11.
The Kondratieff-waves, also called grand supercycles, have a length of between 45 and 60 years.
- 12.
- 13.
Most of the information is retrieved from the homepage of the WTO (http://www.wto.org).
- 14.
- 15.
Note that the tradability of services also contains the possibility of closing down a foreign presence or of reducing foreign production by serving the foreign market with increased domestic exports.
- 16.
See Milberg (2007) for an overview of the expansion of EPZs in the 2000s.
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Winkler, D. (2009). Framework of Services Offshoring. In: Services Offshoring and its Impact on the Labor Market. Contributions to Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-7908-2199-4_2
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