Offshoring of Information-Based Services: Structural Breaks in Industry Life Cycles

Abstract

he emergence of widespread offshoring of information-based services is arguably one of the more transformative business phenomena of the last ten years. A growing body of research has examined the firm-level drivers and location factors (i.e., the "whys" and "wheres") of services offshoring. However, little empirical research has examined the temporal dynamics (or "whens") of services offshoring. Adopting industry life cycle theory as a framework and a Bayesian methodological approach, we explore two key research questions: (i) when do different categories of offshoring services provision change from being emergent sectors to more mature ones relative to one another? and (ii) how do different types of offshoring activity differentially progress through this sequence? Employing a database of 1,420 offshore services FDI projects, we find that the relative skill level and the information sensitivity of the specific service category are associated with the temporal sequence of industry life cycle progression such that activities with decreased information sensitivity are offshored earlier than those with greater information sensitivity. We draw implications for our findings in terms of future waves of service offshoring.