Domestic and International Offshoring of Tasks (original) (raw)

Does Domestic Offshoring Precede International Offshoring? Industry-level Evidence

This paper presents descriptive evidence suggesting that there may be something to be learned about the future patterns of international offshoring from the recent patterns of "domestic offshoring", the relocation of activities across regions within countries. Industries appear to offshore activities first within the same country and only later across the national border. Investigating the domestic and international offshoring patterns for West German manufacturing industries between 1992 and 2007, we find that, on the one hand, industries that offshored more extensively domestically offshored less extensively internationally, and vice versa. On the other hand, we find that those industries that offshored more extensively domestically were still in earlier stages of their life cycles while those that offshored more extensively internationally were already in later stages. International unbundling may consequently not be as unpredictable as it is currently believed to be.

The Offshoring of Production Activities in European Manufacturing

2012

We investigate production offshoring-the relocation of production activities to locations abroad-of European firms. The analysis employs data from the European Manufacturing Survey (EMS). Offshoring activity is declining across most countries, sectors, and firm sizes between the periods 2004/06 and 2007/09. Regression analysis reveals that this decline is also significant after controlling for firm characteristics. Long-term data for Germany indicate that this decrease is part of a longer trend which already started in 2003. Despite the general decrease in offshoring, far-shoring to Asia in general and to China in particular has increased. In contrast, near-shoring to EU member states in Middle and Eastern Europe (EU-12) became less attractive. The EU-12, however, is still the most important target region for offshoring activities of European firms. The dominant motive for offshoring is the wish to reduce labour costs. Expected labour cost reductions explain offshoring to the EU-12, Asia and China in particular. Vicinity to customers and market expansion follow as a motive with a wide margin. However, in contrast to the EU-12, where the offshoring decision is solely dominated by potential labour cost savings, offshoring activities to Asia and China are also significantly related to market expansion motives.

European offshoring: where and whence

2009

The rapid emergence of China and India as major economic players in the global economy has a lot to do with the rapid growth in offshoring during the first decade of the 2000s. Offshoring describes the relocation of business processes from one country to another, but it also involves the migration of jobs to another country, but not the people who perform them. The economic logic is to reduce costs, whether it is wage, transport, or energy costs. And it relates directly to the issue of foreign ownership as well as to Adam Smith's idea of the division of labour and gains from trade. This paper will develop a simple model of offshoring and use a unique dataset on offshoring developed out of the European Restructuring Monitor (ERM). This database contains over 500 offshoring cases since 2002 and measures the employment effects of the job relocation, by both by country and by industry. Additional information helps to support the analysis. Several important conclusions are reached in the paper. First, European Offshoring is moving mainly to Eastern Europe, particularly in the manufacturing industries. Second, India is much more important than China as a location of offshoring, mainly because of the large amount of offshoring in the service industries. Third, offshoring mainly entails movement of low-skill jobs out of Western Europe. Offshoring of R&D activity and the more high-skill jobs tend to remain within Western Europe. Fourth, most low-skill jobs, such as textiles, are moving from Europe to other low-wage countries, particularly in Asia and Northern Africa.

Offshoring, industry heterogeneity and employment

RePEc: Research Papers in Economics, 2017

Economies and production systems are subject to incessant processes of structural change fuelled by the dynamics of demand, technology and international competition. The increasing international fragmentation of production, also known as "offshoring", is an important element of such a (global in scale) process of structural change having important implications for employment and on the way employment gains and losses are distributed across firms, industries, national economies and components of the labour force. This paper assesses the employment impact of offshoring, in five European countries (Germany, Spain, France, Italy and the United Kingdom), distinguishing between different types of inputs/tasks offshored, different types of offshoring industries and types of professional groups affected by offshoring. Results provide a rather heterogeneous picture of both offshoring patterns and their effects on labour, and the presence of significant differences across industries. Along with this variety of employment outcomes, the empirical evidence suggests that offshoring activities are mainly driven by a cost reduction (labour saving) rationale. This is particularly the case for the manufacturing industry where offshoring is found to exert a negative impact among the less qualified (manual) or more routinized (clerks) types of jobs, while the main difference between high-and low-technology industries has to do with the type of labour tasks that are offshored and the types of domestic jobs that are affected. In hightech industries the negative effects of offshoring on employment are concentrated among the most qualified professional groups (managers and clerks). A specular pattern is found in the case of the low-tech industries where job losses are associated to the offshoring of the least innovative stages of production and manual workers are those most penalised.

Offshoring: Facts and figures at the country level

Offshoring has received wide attention lately. Its potential effects, mainly to be materialized in employment and productivity dislocations, are yet to be fully assessed. However, some consensus has been attained as to how to proxy its theoretical definition at an aggregate level. Here we review the most conventional indices the economic literature has so far produced, and employ them to provide an overview of the extent of the phenomenon for a group of countries. Contrary to common belief, our data reveal that offshoring is not exclusive to large developed economies. Further, we highlight the continuing prominence of the manufacturing over the services sector, and observe that, while services offshoring is on the rise, it still represents a small fraction of total offshoring. This is not to deny the employment creation brought about by this higher value-added offshoring or its potential to create more jobs in the future.

Offshoring components and their effect on employment: firms deciding about how and where

Applied …, 2011

Firms must take two fundamental decisions: how and where to produce. Traditional measures of offshoring include information on both decisions but cannot distinguish between them. In this paper we attempt to distinguish the evolution of the requirement of inputs per unit of output (how to produce) from the delocalisation of production to others countries (where to produce). We call global technical change to the first element and net offshoring to the second. We further decompose net offshoring into net inter-industry substitution and intra-industrial offshoring (replacement of domestic inputs for imported ones from the same sector). This last measure quantifies better the concept of delocalisation of production to other countries looking for lower costs, the original idea behind offshoring. This decomposition allows us to further investigate on whether it is technical change or net offshoring the main factor in recent Spanish industrial employment changes.

Offshoring: Facts and Numbers at the Country Level

SSRN Electronic Journal, 2009

O¤shoring has lately received wide attention. Its potential e¤ects, mainly to be materialized in employment and productivity dislocations, are yet to be fully assessed. However, some consensus has been attained as to how to proxy its theoretical de…nition at an aggregate level. Here we review the most conventional indices the economic literature has so far produced, and employ them to provide an overview of the extent of the phenomenon for a group of countries. Contrary to common beliefs, our data reveal that o¤shoring is not exclusive of large developed economies. Further, we highlight the continuing prominence of the manufacturing over the services sector, and observe that while services o¤shoring is on the rise, it still represents a small fraction of total o¤shoring.

Offshoring and firm overlap: Welfare effects with non‐sharp selection into offshoring

Review of International Economics, 2019

Using German establishment data, we provide evidence for selection of larger, more productive producers into offshoring. However, the selection is not sharp, and offshoring and nonoffshoring producers coexist over a wide range of the revenue distribution. To explain this overlap, we set up a model of offshoring, in which we decouple offshoring status from revenues through heterogeneity in two technology parameters. In an empirical analysis, we employ German establishment data to estimate key parameters of the model and show that disregarding the overlap has large quantitative effects. It lowers the estimated gains from offshoring by almost 50% and, at the same time, exaggerates the role of the extensive margin for explaining the evolution of German offshoring since the 1990s.

Drivers and antecedents of manufacturing offshoring and backshoring—A German perspective

Journal of Purchasing and Supply Management, 2009

Discussions on the potentials and risks of the relocation of manufacturing activities to low-wage countries have resurged in recent years in the wake of a new globalisation debate. Manufacturing offshoring has become an increasingly interesting option for firms of all sizes. Besides the chances to improve the company's cost position, the risks of production offshoring are also evident. An analysis of the manufacturing offshoring and backshoring activities of 1663 German manufacturing companies shows that production offshoring has currently lost momentum. On the other hand, backshoring of once offshored manufacturing capacities is also a quantifiable phenomenon. Every fourth to sixth offshoring activity is followed by a backshoring activity within the following 4 years, mainly due to lack of flexibility and quality problems at the foreign location. A deeper, qualitative analysis in 39 German manufacturing companies shows that not all companies do pay sufficient attention to qualitative factors crucial for success and competitive advantage in their location decisions. Thus, managerial implications for a systematic location planning process are drawn from our findings.