AOC: Globalization and Offshore Sourcing of Knowledge Work: Economic, Relational and Informaton & Computer Technology Dynamics

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SBE-0527180Kenneth KraemerThe offshore sourcing of knowledge work is a relatively new frontier in economic globalization. There is a growing shift in knowledge work, including product design, software development and business processes, to places such as Taiwan, India, China, the Philippines and Ireland, and the trend shows no signs of slowing. Some often argue that the shift of knowledge work offshore will lead to the loss of millions of U.S. jobs. Others make the case that there will be significant cost and efficiency gains for the whole economy, and that jobs will be created in newer entrepreneurial firms and industries even as more mature industries move work offshore. Given these conflicting views and potential impacts, the issue is of great interest and concern to U.S. companies, workers and policy makers. What is currently lacking is a solid empirical understanding of the dynamics underlying this phenomenon, how large it may become, and what its consequences might be. A first step is to look closely at the sourcing decisions of firms and the factors that influence them. The most obvious are economic factors, in particular, differences in wage rates and other costs between the U.S. and other countries. In addition, relational factors associated with geographical proximity or social networks are likely to come into play. Finally, information and computer technologies (ICTs) can be used to improve the productivity of U.S. knowledge workers and help keep work onshore, but also can facilitate offshoring by enabling better coordination of activities across borders and geographic distance. In order to understand the offshore sourcing of knowledge work, and its potential scope and impacts, the proposed research will address the following questions: 1) What are the dynamics of economic and relational factors and ICTs in determining whether knowledge work is moved offshore? 2) How do these dynamics differ depending on the nature and maturity of a knowledge activity, and 3) What are the impacts of sourcing decisions on firm performance, and the potential impacts on employment in the U.S.? The research will be conducted by a multidisciplinary team from economics, computer science and management in two interrelated activities: (1) intensive qualitative fieldwork in eight companies aimed at generating a theoretical model and formal hypotheses, and (2) quantitative analysis to refine, formalize and test the model on a large-scale survey sample of 800 firms. Broader ImpactThe research is socially significant because overseas relocation of knowledge-based activities has important implications for U.S. economic prosperity, potentially affecting jobs, trade, innovation, and industry competition. It is important to know whether there are limits to the amount of knowledge-based work that can be relocated offshore. It is also important to understand whether the deployment of ICTs might be a source of competitive advantage for U.S. firms and workers, or whether their global diffusion will tend to level the playing field with other countries. Finally, it is important to measure the effects of offshore sourcing on firm performance, in order to understand the both costs and benefits.