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The project

Outsourcing for Development

Background
In most accounts of the changing nature of the global economy, the phenomena of ‘outsourcing’ plays a pivotal role. In the search for global efficiencies and competitive advantage, companies are splitting up the value chain and locating production and support functions in countries and regions that offer optimal conditions for that particular activity.
Potentially, outsourcing offers large benefits to countries at both ends of the process. Developing countries gain jobs, skills, access to foreign markets, while the outsourcing country obtain reduced costs, better competitiveness and the opportunity to move into higher vale added activities. On the other hand, there are potential risks and costs associated with outsourcing, e.g. loss of jobs and production in the North and dependency, lock in, and races-to-the bottom in the South. Hitherto, the debate on outsourcing has focused on the problems (or less often, on the opportunities) of outsourcing to low cost locations seen from the perspective of OECD countries. Rarely has the mirror question been raised. This is why we propose to analyse the following question: What are the development effects of growing outsourcing to developing countries?
The “Outsourcing for Development” project will contribute to answer this question by applying a firm perspective on the issue. It will analyse, how outsourcing collaborations impact the market access, technology stage, organisation, capabilities, and strategies of companies located in developing countries. The project will emphasise Danish companies’ outsourcing collaborations with local companies in six developing countries: Vietnam, China, India, Malaysia, South Africa and Ghana.
Theoretical Perspectives
An important objective of the “Outsourcing for Development” project will be to identify and further develop theoretical frameworks that can be employed to analyse the development implications of outsourcing at the company level. Nevertheless, already at this point, we can identify a number of theoretical perspectives that may guide the analysis:
  • International trade economics
  • The literature on institutions and competitiveness
  • The Global Value Chain literature
  • The theories of the company
  • Learning theory
  • Stakeholder theory.
Specific studies on outsourcing for development
Based on the above presentation of the background to the debate and the review of relevant theoretical perspectives, we propose to take up three distinct dimensions of the outsourcing for development issue:
  • The first dimension concerns the question of, how developing country companies can evolve into attractive outsourcing partners
  • The second dimension concerns the question of the effects of outsourcing relationships on companies participating in outsourcing collaboration
  • The third dimension concerns the question of moving on from an initial outsourcing success.
In other words, we suggest analysing three stages in the evolution of developing country company's outsourcing collaborations: entry, operation, and upgrading. For each of the three dimensions, we propose to undertake a number of studies.
  • Entry: How do companies in developing countries become partners in outsourcing collaborations?
  • Operation: What are the effects of outsourcing collaborations on developing country companies?
  • Upgrading: How can developing country companies move on from an initial outsourcing success?
If you want more information about the specific studies, see: Sub-studies.
Methodology
The “Outsourcing for Development” project consists of a number of specific studies that add up to a comprehensive picture of the development implications of outsourcing. While each study will have its own methodological and theoretical approach, they all share some common features:
  • Unit of analysis: One thing uniting the different studies is that they all apply a micro or firm level perspective on the outsourcing for development issues
  • Countries: The project will emphasise outsourcing collaborations that involve Danish companies
  • Data collection methodology: In terms of data collection, the studies will employ a combination of desk-top studies, case studies in Denmark and host countries, surveys, and database analysis.
  • Schedule: The project started in November 2005 and it will end in November 2008.

Sidst opdateret af Bente Faurby 26.03.2009