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New Bangalores - The role of Central and Eastern Europe in business and IT services offshoring

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  • Zoltan Gal

    () (Centre for Economic and Regional Studies, Hungarian Academy of Sciences Associate professor, University of Kaposvar, Faculty of Economics)

Abstract

The paper discusses how the second global shift in business services provision and corporate restructuring open up new offshoring opportunities into Central and Eastern Europe (CEE). It explores three problems: First, it builds upon the theoretical framework of the new paradigm of globalization, which considers offshoring as one of the most important globalizing forces of recent time. This results in a shift in global trade, namely from trade in goods to trade in tasks determined by the changing trends in the division of labour. Second, the paper gives an overview of services relocation into CEE in comparison with its Asian counterparts. As the EU expanded eastwards, the opportunities for European corporations to offshore their business services to these nearshore locations increased. Building on the region s nearshoring advantages such as geographical-cultural proximity and on their multilingual graduate supply, CEE is likely to utilise more value added quality driven BPO and KPO services. Third, the paper examines the implications of offshoring for the home markets in CEE assessing its impact on their locations. It reveals the role of offshoring activities in the metropolitan transformation and discusses the factors that make the capital cities an increasingly attractive option for companies to relocate their services. Despite CEE has taken advantage on the trend supported by the global service delivery models reducing dependency on any single location, its further growth may be influenced by the worsening macro-conditions, and future prospect of the region depends largely on government incentives and on the success of exploiting talent pools offered by its provincial cities.

Suggested Citation

  • 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.
  • Handle: RePEc:sph:rjedep:v:2:y:2013:i:3:p:77-100
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    File URL: http://jedep.spiruharet.ro/RePEc/sph/rjedep/Rev6_6_Gal.pdf
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    References listed on IDEAS

    as
    1. Michael H Grote & Florian A Täube, 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.
    2. Gregory Mankiw, N. & Swagel, Phillip, 2006. "The politics and economics of offshore outsourcing," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 1027-1056, July.
    3. Hillberry, Russell & Hummels, David, 2008. "Trade responses to geographic frictions: A decomposition using micro-data," European Economic Review, Elsevier, vol. 52(3), pages 527-550, April.
    4. Grote, Michael H. & Täube, Florian A., 2007. "When outsourcing is not an option: International relocation of investment bank research -- Or isn't it?," Journal of International Management, Elsevier, vol. 13(1), pages 57-77, March.
    5. Magdolna Sass & Martina Fifekova, 2010. "Offshoring and Outsourcing Business Services to Central and Eastern Europe: Some Empirical and Conceptual Considerations," European Planning Studies, Taylor & Francis Journals, vol. 19(9), pages 1593-1609, October.
    6. Meyer, Thomas, 2006. "Offshoring to new shores: Nearshoring to Central and Eastern Europe," MPRA Paper 5785, University Library of Munich, Germany.
    7. Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821.
    8. Anonymous, 2003. "Competing in the 21st Century," Amber Waves, United States Department of Agriculture, Economic Research Service, April.
    9. Mary Amiti & Shang-Jin Wei, 2005. "Service Offshoring, Productivity, and Employment; Evidence from the United States," IMF Working Papers 05/238, International Monetary Fund.
    10. Robert-Nicoud, Frédéric, 2008. "Offshoring of routine tasks and (de)industrialisation: Threat or opportunity--And for whom?," Journal of Urban Economics, Elsevier, vol. 63(2), pages 517-535, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    second global shift; trade in tasks; offshoring; corporate location strategies; nearshoring; Central and Eastern Europe; primary and secondary offshoring locations.;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • L8 - Industrial Organization - - Industry Studies: Services
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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