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When outsourcing is not an option: International relocation of investment bank research -- Or isn't it?

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Author Info

  • Grote, Michael H.
  • Täube, Florian A.

Abstract

Outsourcing is high on the agenda of firms seeking to cut costs. Based on an enhanced value-chain concept we develop a model that determines the conditions under which outsourcing and offshoring are not expedient. The model allows for an integrated analysis of horizontal and vertical links to actors within and outside the firm. Equity and country research in investment banks and their outsourcing potential are used as case studies. We draw mainly on qualitative evidence from interviews with investment bank analysts, as well as data on locations of research units of foreign investment banks in India. The option of outsourcing certain stages of business processes and offshoring parts of the value chain within firms to low-wage locations depends crucially on how processes are 'embedded' in relation to other departments within and to corresponding actors outside the firm. Our analysis shows that there is little, if any, scope for outsourcing but some potential for low-level research activities to be offshored to low-cost regions.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Management.

Volume (Year): 13 (2007)
Issue (Month): 1 (March)
Pages: 57-77

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Handle: RePEc:eee:intman:v:13:y:2007:i:1:p:57-77

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Related research

Keywords: Global sourcing Value chain Proximities Investment bank research India;

References

References listed on IDEAS
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  1. Mark Palmer & Leigh Sparks, 2004. "Investment bank analysts and retail research," Environment and Planning A, Pion Ltd, London, vol. 36(9), pages 1521-1528, September.
  2. Mary Amiti & Shang-Jin Wei, 2005. "Fear of service outsourcing: is it justified?," Economic Policy, CEPR & CES & MSH, vol. 20(42), pages 308-347, 04.
  3. Michael Storper & Anthony J. Venables, 2004. "Buzz: face-to-face contact and the urban economy," Journal of Economic Geography, Oxford University Press, vol. 4(4), pages 351-370, August.
  4. Walter, Ingo, 2004. "Conflicts of Interest and Market Discipline Among Financial Service Firms," European Management Journal, Elsevier, vol. 22(4), pages 361-376, August.
  5. Peter Maskell & Torben Pedersen & Bent Petersen & Jens Dick-Nielsen, 2005. "Learning Paths to Offshore Outsourcing - From Cost Reduction to Knowledge Seeking," DRUID Working Papers 05-17, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  6. Bae, Kee-Hong & Stulz, René M. & Tan, Hongping, 2008. "Do local analysts know more? A cross-country study of the performance of local analysts and foreign analysts," Journal of Financial Economics, Elsevier, vol. 88(3), pages 581-606, June.
  7. Abhijit Banerjee & Esther Duflo, 1999. "Reputation Effects and the Limits of Contracting: A Study of the Indian Software Industry," Working papers 99-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Christopher J. Malloy, 2005. "The Geography of Equity Analysis," Journal of Finance, American Finance Association, vol. 60(2), pages 719-755, 04.
  9. Volker Mahnke & Mikkel Lucas Overby & Jan Vang, 2005. "Strategic Outsourcing of IT Services: Theoretical Stocktaking and Empirical Challenges," Industry and Innovation, Taylor & Francis Journals, vol. 12(2), pages 205-253.
  10. Bruce Cronin & Lesley Catchpowle & David Hall, 2004. "Outsourcing, Offshoring - Outsourcing and Offshoring," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 5(2), pages 17-21, October.
  11. Michael H. Grote, 2002. "A value chain approach to financial centres - The case of Frankfurt," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 93(4), pages 412-423, 09.
  12. Brealey, R. A. & Kaplanis, E. C., 1996. "The determination of foreign banking location," Journal of International Money and Finance, Elsevier, vol. 15(4), pages 577-597, August.
  13. Mol, Michael J. & Pauwels, Pieter & Matthyssens, Paul & Quintens, Lieven, 2004. "A technological contingency perspective on the depth and scope of international outsourcing," Journal of International Management, Elsevier, vol. 10(2), pages 287-305.
  14. Mutinelli, Marco & Piscitello, Lucia, 2001. "Foreign direct investment in the banking sector: the case of Italian banks in the '90s," International Business Review, Elsevier, vol. 10(6), pages 661-685, December.
  15. Michael H Grote & Florian A T�ube, 2006. "Offshoring the financial services industry: implications for the evolution of Indian IT clusters," Environment and Planning A, Pion Ltd, London, vol. 38(7), pages 1287-1305, July.
  16. Gordon L. Clark, 2002. "London in the European financial services industry: locational advantage and product complementarities," Journal of Economic Geography, Oxford University Press, vol. 2(4), pages 433-453, October.
  17. Cowan, Robin & Foray, Dominique, 1997. "The Economics of Codification and the Diffusion of Knowledge," Industrial and Corporate Change, Oxford University Press, vol. 6(3), pages 595-622, September.
  18. Neil Wrigley & Andrew Currah & Steve Wood, 2003. "Investment bank analysts and knowledge in economic geography," Environment and Planning A, Pion Ltd, London, vol. 35(3), pages 381-387, March.
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Citations

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Cited by:
  1. Baier , Elisabeth & Rammer , Christian & Schubert , Torben, 2013. "The Impact of Innovation Off-shoring on Organizational Adaptability," CIRCLE Electronic Working Papers 2013/44, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
  2. Baier, Elisabeth & Rammer, Christian & Schuber, Torben, 2013. "The impact on innovation off-shoring on organizational adaptability," ZEW Discussion Papers 13-109, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Martinez-Noya, Andrea & Garcia-Canal, Esteban & Guillen, Mauro F., 2012. "International R&D service outsourcing by technology-intensive firms: Whether and where?," Journal of International Management, Elsevier, vol. 18(1), pages 18-37.
  4. Somnath Lahiri, 2011. "India-focused publications in leading international business journals," Asia Pacific Journal of Management, Springer, vol. 28(2), pages 427-447, June.
  5. Zoltan Gal, 2013. "New Bangalores - The role of Central and Eastern Europe in business and IT services offshoring," Journal of Economic Development, Environment and People, Alliance of Central-Eastern European Universities, vol. 2(3), pages 77-100, September.
  6. Julien Gooris & Carine Peeters, 2012. "Home-Host Country Distance and Governance Choices in Service Offshoring," Working Papers ECARES ECARES 2012-007, ULB -- Universite Libre de Bruxelles.

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