Services offshoring: Location choice and subnational regional advantages in China

Abstract

In a broad sense, service offshoring is a specific type of service innovation because companies engaging into service offshoring will have to inevitably make changes in a number of areas, including internal procedures, business model, service delivery, technology, target customers, service content, legal environment of service, and so on. In addition, service innovation may also drive service offshoring, in that innovative service companies are more likely to internationalize and be successful that way. Effectiveness of service offshoring is largely determined by whether the company is able to choose the ‘right’ foreign location to perform the service. In this book chapter we extend research on location choice of service offshoring to the subnational level. We examine the patterns of distribution of offshoring activities in China, and determinants of the location selection at the city level. Our empirical study confirmed that the location of offshoring of services firms in China is highly influenced by location-specific factors, in particular the presence of a large educated workforce in the city.