Framework of Services Offshoring

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.