Does offshore outsourcing impact home employment? Evidence from service multinationals

Abstract

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How outward investment from emerging markets affects economic development at home: using the eclectic paradigm to synthesize two IB literatures

“…Despite that most scholars" attention went to understanding when and how direct effects and spillovers materialize in host countries, some evidence exists that specifically relates to the home countries from which MNEs internationalize. First, most studies looking into the direct effects of foreign investment activity in firms" home countries have considered employment only (e.g., Driffield et al, 2019;Debaere, Lee, & Lee, 2010;Hong, Lee, & Makino, 2019). This may relate to the widespread interest in the phenomenon of offshoring, and more recently "reshoring", as developed economy firms are observed to relocate certain value chain activities to different locations in their subsidiary network, thereby often shifting jobs abroad in the process (Doh, 2005;Delis, Driffield, & Temouri, 2019).…”

“…Even when some manufacturing firms shift jobs overseas (Kravis & Lipsey, 1988), the net effect on domestic employment does not tend to be negative in most cases (Castellani, Mariotti, & Piscitello, 2008). Some scholars have started to test on a larger scale whether outward investment positively affects home-country employment (Driffield et al, 2019), but others have analyzed the firm"s entire home region, making it still difficult to distinguish between the jobs created by the MNE itself and other firms in its geographic proximity (Elia, Mariotti, & Piscitello, 2009;. Next to growing in size, the investor firm may also experience improvements in its own domestic productivity or domestic profitability as a result of foreign investment (Li, Li, & Shapiro, 2012;Bertrand & Capron, 2015;Rui, Cuervo-Cazurra, & Un, 2016), possibly leading them to pay higher wages (Maksimov, Wang, & Luo, 2017).…”

“…First, scholars have overwhelmingly focused on the foreign investment undertaken by firms from developed economies. Second, attention predominantly went to the development impact of FDI in the host countries receiving the investment (Narula and Dunning, 2010; Dunning and Fortanier, 2007), with the notable exception of recent additions to the literature that consider the effect of MNEs’ outward FDI on the home countries from which they internationalize (Clougherty et al , 2014; Driffield et al , 2019).…”

Outbound Foreign Direct Investment (FDI) Motivation and Domestic Employment by Multinational Enterprises (MNEs)

“…Other studies find a complementary, positive relation between outbound FDI and domestic employment (e.g., Hijzen, Inui, & Todo, 2007;Becker & Muendler, 2008;Federico & Minerva, 2008;Desai, Foley, & Hines, 2009). In addition, numerous studies report mixed results that are conditional on firm, country, or industry variations (e.g., Mariotti, Mutinelli, & Piscitello, 2003;Head & Ries, 2004;Chen & Ku, 2005;Harrison & McMillan, 2007;Konigs & Murphy, 2006;Ekholm, Forslid, & Markusen, 2007;Debaere, Lee, & Lee, 2010;Mitra & Ranjan, 2010;Hijzen, Jean, & Mayer, 2011;Driffield, Pereira, & Temouri, 2017).…”

Exploring the determinants of location choice decisions of offshored R&D projects

“…A clear pattern has emerged in which MNEs have shifted the geographical focus of their R&D activities from developed economies across North America, Western Europe and Japan and are increasingly offshoring them to more low-cost countries within transforming economies in Eastern Europe, China, Russia and the emerging countries of Asia (Bunyaratavej et al, 2007;Huggins et al, 2007;Lewin et al, 2009). Correspondingly, scholars have examined how MNEs engage in offshoring activities at the country, industry, firm, and managerial levels (see Clampit et al, 2015;Driffield et al, 2017;Hätönen and Eriksson, 2009;Lahiri, 2016;Oshri et al, 2015). Conventionally, companies try to keep control over their core activities, which provide them with competitive advantages in the market; however, the offshoring of core activities such as information technology (IT) and research and development (R&D) (Steinberg et al, 2017)-the so-called knowledge intensive activities-is gradually increasing and becoming more geographically dispersed (Gammeltoft, 2005;Lewin et al, 2009;Nieto & Rodríguez, 2011).…”