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Offshoring in Business Services Sector Over the Business Cycle: A Case of Growth of the International Cooperation

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  • Chilimoniuk-Przeździecka Eliza

    (Institute of International Economics, Warsaw School of Economics)

Abstract

In this paper I analyze the role of business service offshoring in international cooperation over the recession. In business services - as described in Schumpeterian literature - external restructuring including resource and production relocation is more intensive during recession periods while intensive internal restructuring accompanies expansion periods. As external restructuring encompass business processes fragmentation and offshoring of services, I also argue - taking into account historical evidence - that current economic crisis would result in growing service offshoring in business service sector. I expect that many financial institutions would relocate part of their business processes abroad, where operating costs are lower, as they find that external restructuring via offshoring is the way to survive. This, in turn, will be the most possible result in growth of service offshoring projects located in CEE and Asia, as these two locations were the most attractive ones in recent years for service offshoring. The process is reflected by growth of FDI outflows from developed economies to CEE and Asia as well as growth of business and IT services trade between the mentioned economies. However, I also expect that in short run (one year perspective) we will experience tremendous decrease of FDI flows including investment in service offshoring, nevertheless the share of FDI flows related to service offshoring in total FDI flows will increase.

Suggested Citation

  • Chilimoniuk-Przeździecka Eliza, 2011. "Offshoring in Business Services Sector Over the Business Cycle: A Case of Growth of the International Cooperation," Folia Oeconomica Stetinensia, Sciendo, vol. 10(1), pages 7-19, January.
  • Handle: RePEc:vrs:foeste:v:10:y:2011:i:1:p:7-19:n:5
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    References listed on IDEAS

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    1. Carlos Carreira & Paulino Teixeira, 2008. "Internal and external restructuring over the cycle: a firm-based analysis of gross flows and productivity growth in Portugal," Journal of Productivity Analysis, Springer, vol. 29(3), pages 211-220, June.
    2. Eller, Markus & Haiss, Peter & Steiner, Katharina, 2006. "Foreign direct investment in the financial sector and economic growth in Central and Eastern Europe: The crucial role of the efficiency channel," Emerging Markets Review, Elsevier, vol. 7(4), pages 300-319, December.
    3. Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2004. "FDI and economic growth: the role of local financial markets," Journal of International Economics, Elsevier, vol. 64(1), pages 89-112, October.
    4. Ouyang, Min, 2009. "The scarring effect of recessions," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 184-199, March.
    5. Bevan, Alan A. & Estrin, Saul, 2004. "The determinants of foreign direct investment into European transition economies," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 775-787, December.
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    Keywords

    FDI; offshoring; economic crisis;

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