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Offshoring and Outsourcing Business Services to Central and Eastern Europe: Some Empirical and Conceptual Considerations

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  • Magdolna Sass
  • Martina Fifekova

Abstract

The global structural shift towards service-based foreign direct investment (FDI) across the world is a relatively recent phenomenon resulting from the increased tradability of services. Although India and Ireland have traditionally been viewed as the main receiver countries, the Central and Eastern European (CEE) region is becoming an increasingly popular destination for business service offshoring and outsourcing. The article focuses first on the empirical and conceptual challenges to understanding the offshoring and outsourcing of business services in the context of significant difficulties with their definition, categorization and classification. It discusses the shortcomings of quantitative data and provides a theoretical framework needed to understand the specific patterns of service sector FDI in the context of CEE. Second, the article outlines the current position of CEE countries as destinations for service sector FDI: it analyses the patterns of service sector investment and discusses the reasons for its emergence as a receiver region. The empirical material is drawn from 30 interviews conducted with senior managers in business service foreign investment in the Czech Republic, Hungary, Poland and Slovakia. The article concludes that the composition of services FDI flows is changing, reflecting the growth of resource seeking vertical investment in the region. The share of CEE countries in the global flows of this type of investments is still low, but the region shows a growing potential. Its attractiveness is based on a number of factors, like availability of skilled labour with strong language skills, low costs, favourable business and stable political environment, well-developed infrastructure and geographical and cultural proximity to Western Europe.

Suggested Citation

  • 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.
  • Handle: RePEc:taf:eurpls:v:19:y:2010:i:9:p:1593-1609
    DOI: 10.1080/09654313.2011.586196
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    Citations

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    Cited by:

    1. Vrh, Nataša, 2015. "Pay-off to Participation in Global Value Chains: How Much are New EU Member States Lagging behind the Rest of EU Countries in Terms of Domestic Value Added in Exports?," MPRA Paper 67805, University Library of Munich, Germany.
    2. Magdolna Sass & Miklos Szanyi, 2012. "Two essays on Hungarian relocations," IEHAS Discussion Papers 1223, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    3. 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.
    4. Damijan, Jože & Kostevc, Črt & Marek, Philipp & Rojec, Matija, 2015. "Do Manufacturing Firms Benefit from Services FDI? – Evidence from Six New EU Member States," IWH Discussion Papers 5/2015, Halle Institute for Economic Research (IWH).
    5. Martin Falk, 2012. "Determinants of Greenfield Investment in Knowledge Intensive Business Services," FIW Research Reports series IV-002, FIW.
    6. repec:spr:jknowl:v:8:y:2017:i:2:d:10.1007_s13132-015-0260-9 is not listed on IDEAS
    7. Magdolna Sass & Gábor Hunya, 2014. "Escaping to the East? Relocation of business activities to and from Hungary, 2003–2011," IEHAS Discussion Papers 1407, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.

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