Why are different services outsourced to different countries?

Abstract

The "tradability revolution" in services has led to a dramatic expansion of offshore outsourcing of services, allowing firms to take advantage of lower production costs in foreign countries. However, production costs alone cannot explain the location determinants of offshore outsourcing of services. In this paper, we argue that minimizing transaction costs is also an important determinant of the location of offshore outsourcing of services. We empirically analyze characteristics of services and characteristics of foreign countries that may impact on transaction costs in an outsourcing relationship and hence determine where services will be outsourced offshore. We derive measures of service characteristics -routineness, complexity and interactiveness -based on the tasks required to provide them. Further, we posit that there are interaction effects between service and country characteristics. Using Bureau of Economic Analysis data on US service outsourcing across 11 types of services to 31 countries between 1992 and 2005, we find that:(1) services that are more routine, less complex or less interactive are outsourced more to foreign countries; (2) services are outsourced more to countries with higher institutional quality and greater cultural proximity; (3) non-routine, complex and interactive services are outsourced relatively more to countries with a better institutional quality.

How much does job autonomy vary across countries and other extra-organizational contexts?

“…The clearest rationale for expecting systematic inter-industry differences in job autonomy actually derives from the large literature considering (technological) differences in the nature of the value-added process in various industries (Costinot, Oldenski and Rauch 2011;Liu, Feils and Scholnick 2011). Particularly, we expect that job autonomy will be higher in industries that have more complex (i.e., less routine) and more skill-intensive production processes.…”

“…For instance, related to Tung's (1979) distinction between external environments on the basis of the routineness/non-routineness of their problem/opportunity states, various authors have classified industries on the basis of the routineness of these industries' production processes (Costinot, Oldenski and Rauch 2011;Autor and Dorn 2013). Other such industry classifications show substantial variation in factor intensities (i.e., how intensely industries use skilled and unskilled labor, capital and raw materials) (Romalis 2004), as well as in the extent to which industries' value-added processes involve interaction with (prospective) customers (Liu, Feils and Scholnick 2011).…”

La competitividad de América Latina en el comercio de servicios basados en el conocimiento

“…Tanto los reportes producidos por las principales consultoras internacionales como varios trabajos académicos (Doh, Bunyaratavej y Hahn, 2008;Ramasamy y Yeung, 2010;Capik y Drahokoupil, 2011;Liu, Feils y Scholnick, 2011;Kim, Yoon y Lee, 2012) coinciden en la relevancia de los costos (sobre todo laborales) como determinantes de las decisiones de deslocalización de servicios y de la competitividad exportadora. En esta línea, Eichengreen y Gupta (2012) muestran que el tipo de cambio es un factor explicativo clave de las exportaciones de los sic, con mayor fuerza que en el caso de los bienes.…”

“…La disponibilidad de capital humano es un segundo factor determinante de las decisiones de deslocalización y de la ied vinculada (Liu, Feils y Scholnick, 2011;Doh, Bunyaratavej y Hahn, 2008), como también de las exportaciones de servicios (Guerrieri y Meliciani, 2005;Nyahoho, 2010;Arora y Bagde, 2011). Goswami y otros (2012) encuentran que el capital humano afecta positivamente a las exportaciones de servicios y que el retorno a la inversión educativa es superior en los países en desarrollo.…”

The effect of communication costs on trade in headquarter services

“…This has direct implications for the type of activities relocated abroad, with routine tasks being more likely to be offshored relative to complex tasks (Oldensky, 2012;Liu et al, 2011). of multinational production in face of barriers to information transmission (Keller and Yeaple, 2013;Oldensky, 2012;Liu et al, 2011). The closest papers to this one are Antras et al (2006Antras et al ( , 2008, who model multinational production as resulting from the efficient organization of knowledge flows in the presence of heterogeneous workers.…”