Offshoring of Information-intensive Services: Structural Breaks in Industry Life Cycles. ACES Working Papers, August 2010

The emergence of widespread offshoring of information-intensive services is arguably one of the more impactful phenomena to transform business in the last ten years. A growing body of research has examined the firm-level drivers andlocation factors (i.e., the why's and where's) of services offshoring. However, little empirical research has examined the maturation sequencing (or when's) of services offshoring. Adopting industry life cycle theory as a framework, the key research questions examined in the paper are: when do different categories of offshoring services provision change from being emergent sectors to more mature ones, and how does the timing of this sequence relate to the type of service offshored. Using a database of 1420 offshore services FDI projects, we find that the value-add as well as the information sensitivity of the service category are related to when the service categories progress through the industry life cycle. Implications for future waves of service offshoring are discussed

An Integrative Approach to Measuring Economic Convergence: The Case of the European Union

Empirical convergence analyses have helped provide insight as to whether economies are converging. Previous works on convergence have tended to focus on a particular economic indicator exclusively, even though the convergence process has multiple components. Improved estimates of convergence are likely to result from an integrated approach wherein several indicators are considered simultaneously. The proposed model integrates convergence analyses for three convergence variables to estimate the overall rate of economic convergence in the EU during 1960 to 1990. The research indicates that convergence is occurring overall, but that employment convergence is happening at a considerably slower pace than are the other types of convergence.

The Evolution of Risk in Information Systems Offshoring: The Impact of Home Country Risk, Firm Learning, and Competitive Dynamics

Information systems offshoring has emerged as a significant force in the global political economy, an important source of firm-specific competitive advantage, and a focal point for debates over the benefits and costs of globalization. As worldwide competition exerts increasing pressure on the IS function of firms to become geographically unbundled, and IS services are dispersed among increasingly distant and unfamiliar locations, the issue of risk emerges as a significant factor in decisions about where to locate offshore facilities. Drawing from prior research in IS outsourcing/offshoring and theoretical perspectives from international strategy and multinational management, we examine the determinants of risk firms bear in their offshoring decisions. In particular, the current paper explores firm-level and environment-level “push” factors that drive firms to accept increasingly greater degrees of host country risk. We predict that firm-level risk outcomes for locating IS offshore facilities will be influenced by prior firm-specific experience, the relative gap between home and host country risk levels, and the overall movement by IS offshore services providers toward increasingly riskier locations. We test these hypotheses on a proprietary data set of more than 850 information technology and software offshoring projects in 55 host countries worldwide during the period 2000 through 2005. We find that firm-specific experience and the core “risk gap” between home and host country are predictive of companies pursuing progressively riskier locations, but that their effects dissipate as environment-wide experience is incorporated into our model. Our analysis suggests that broader dynamics in the competitive environment are powerful contributors to the overall observation that IS offshoring is moving to increasingly high-risk locations. This trend has implications for the management, security, and global integration of information systems. Our study contributes to the literature on risk and IS offshoring in providing the first worldwide empirical examination of the determinants of actual firm IS offshoring behavior with respect to offshoring location risk

Multinational investment and host country development: Location efficiencies for services offshoring

Services offshoring has become an important source of investment and development in many emerging economies. While much attention has been paid to companies' use of services offshoring to lower costs, not all of these offshoring activities have yielded the anticipated results. Thus, the choice of where to locate offshore facilities is an important yet complex one that has substantial implications for both the investing firm and host country. In this paper, we adopt the perspectives of service firms located in the U.S. and empirically examine the attractiveness of host countries for offshoring of services. Using data envelopment analysis (DEA), we examine which countries use their resources or inputs most efficiently in order to produce outputs that make them attractive for services offshoring. We find that China, India, Ireland, the Netherlands, Pakistan, Slovakia, Spain, and the U.K. are particularly attractive locations for services offshoring. All of these countries have at least one core efficiency-creating competency among the key inputs of wages, education, and infrastructure. We discuss implications for firms and government policy makers and offer recommendations for future research.

International offshoring of services: A parity study

Conventional wisdom suggests that firms engage in international offshoring of services primarily to reduce wage costs associated with a given service activity. Drawing on international business research on the costs of doing business abroad (CODBA), liability of foreignness (LOF), and institutional theory, we investigate the factors that contribute to the location choices for services offshoring activity, including wage differentials between the home and host countries. We find that consistent with a parity perspective but contrary to conventional expectations, a country is more likely to be a destination of services offshoring as the average wage of a country increases. We also find that education level and cultural similarity are significant drivers of offshoring location choices, again consistent with a parity perspective. This study contributes to debates about the economic impact of services offshoring by showing that firms locate offshoring facilities in destinations that are closer in wages to the home country and those with higher education levels and cultural similarity.Services Offshoring Outsourcing Government policy Empirical