In the realm of globalization, international sourcing of services contributes to reshape firm’s value chains as the physical dispersion of these activities increases. This reorganization does not simply lead to the replication of domestic activities in a destination providing resource advantages, but, in most cases, it implies profound modifications of the flows of activities, including the reconsideration of the boundaries of the firm. Global sourcing strategies, also called offshoring, seek to increase firm’s efficiency by combining the exploitation of foreign locational advantages with process redesign. When aggregated, these firm-level strategies translate into considerable international exchanges to a point that flows of intermediate services represent about 73% of the total of international trade in services for 2005 (OECD, 2009). These activities present a high degree of heterogeneity in terms of functions concerned, the related domestic industries, motivations, destinations, organizational structure or scope. This wave of internationalization, because of its relative novelty, growth and rapid diversification, draws the interest from the public, political and academic spheres but the comprehension of the determinants shaping the configuration and organization of these activities still remain largely unknown. Based on four essays, this PhD thesis addresses the impact of host-country characteristics and distance factors on the configuration of international sourcing activities in the dimensions of location, governance model and scope of activities.<p><p>The first paper studies the country-specific determinants of the interdependent choices of destination and governance model in the global sourcing of services. I explore the simultaneity of these decisions and I jointly estimate their determinants using implementation-level data. Derived from comparative advantages, host-country uncertainty and the global dispersion of tasks, I present three classes of factors driving global sourcing configurations: resource arbitrages, host-country risk and communication barriers. Empirical results confirm that locations with resource or capabilities advantages specific to services – low labour cost, education and labour supply – attract more offshoring activities. However the pursued resource advantages differ depending on the governance model. Country attractiveness for captive implementations presents a higher positive sensitivity to the education-intensive resources, while outsourcing strategies have a greater cost-cutting orientation coming from labour cost arbitrages. Furthermore, the risks inherent to the host-country, in the form of weak formal institutions and inexperience in the destination, have the dual effect of deterring location attractiveness, while they foster the adoption of the outsourcing model compared to the captive one. Communication barriers coming from geographic distance, cultural and linguistic differences have the simultaneous effect of discouraging global sourcing in those locations while, to overcome these constraints, firms favor higher integration with the use of captive models. <p><p>This second paper further explores the mechanisms through which home-host country distances affect the choice of governance mode in service offshoring. Using a Transaction Cost Economics approach, I explore the comparative costs of the hierarchical and contractual models to show that different dimensions of distance (geographic, cultural and institutional), because they generate different types of uncertainties, impact offshore governance choices in different ways. Empirical results confirm that, on the one hand, firms are more likely to respond to internal uncertainties resulting from geographic and cultural distance by leveraging the internal controls and collaboration mechanisms of a captive offshore service center. On the other hand, they tend to respond to external uncertainties resulting from institutional distance by limiting their foreign commitment and leveraging the resources and local experience of third party service providers. Finally, I find that the temporal distance component (time zone difference) of geographical dispersion between onshore and offshore countries plays a dominant role over the spatial distance component.<p><p>The third section then concentrates on the impact of the institutional environment (regulative) on international sourcing activities. To exploit country-specific advantages, firms that source activities from abroad are forced to integrate the institutional environment into the choice not only of host-country, but also of governance model for their offshore activities. Considering inefficient institutions as drivers of transaction costs, this conceptual paper explores the impact of the host-country regulative environment in the interdependent decisions of country selection and governance model (captive or outsourcing) in firms’ global sourcing strategies. I consider two classes of assets: transferred assets for knowledge/information flows, and local assets sourced from the host location. I show that each class involves specific institutional risks for offshoring practices. In turn, because of the different institutional exposures of the captive model and the outsourced one, the institutional risks associated with transferred and local assets have different implications for the choice of governance model. Firms react to institutional risks relative to transferred assets by internalizing their activity, but they bypass inefficient institutions for local assets using outsourcing. Based on the interaction of the institutional risks relative to each class of assets, I then obtain sufficient conditions that give the firm-optimal combinations of country selection and governance model.<p><p>The last section studies how firm-level and country-level risks affect the scope of the process operated in the foreign unit. To prevent appropriation hazard for proprietary content, firms choose a particular disaggregation of the value chain. We argue that, in response to the lack of control offered by internalization and the lack of protection provided by host-country institutions for protecting proprietary content, firms reduce the scope of their activities. In other words, they exploit existing complementarities between the tasks of their value chain using a higher disaggregation of their process and therefore reducing appropriation value for outsiders. Based on a sample of 750 international sourcing projects, regression results on the scope of offshore activities confirm that firms prefer to source discrete tasks rather than entire processes when they lack the protection of internalization and external institutions. In addition, experience modifies these relationships. On the one hand, inexperienced firms do not rely on this slicing mechanism to prevent the loss of control implied by an outsourcing model. On the other hand, the effect of weak institutional protection is perceived as more stringent for inexperienced firms. When host-country institutions are deficient, these firms, compared to the experienced ones, have a higher propensity to operate discrete tasks rather than entire processes.<p> / Doctorat en Sciences économiques et de gestion / info:eu-repo/semantics/nonPublished

Over the last few decades, production processes have become increasingly fragmented: they are divided into ever smaller parts considered as separate activities, which are then spread over various locations in different countries. In other words, value chains for many products are becoming global. This implies that inputs into the production process are sourced from both local and foreign suppliers. The latter mode of sourcing is commonly referred to as offshoring. Expressed as the share of imported in total intermediates, offshoring has grown relatively fast in the recent past. Moreover, its scope has been extended as it increasingly encompasses not only manufacturing but also service activities. A typical example for the former is the sourcing from abroad of parts and components for car assembly. While offshoring of manufacturing activities has been occurring since long and has been largely facilitated by trade liberalisation, the offshoring of service activities such as the provision of accounting or call centre services is a more recent phenomenon that has been fostered by the increased tradability of such services.<p>With the increasing scale and scope of offshoring, it becomes crucial to get a grasp of its drivers as well as the gains and threats associated with it. The latter are the focal point of the public and academic discussion around offshoring, in particular the potential threats for workers in developed economies. Typical questions that are being raised are whether offshoring leads to job losses in developed countries and whether it favours certain categories of workers and is to the disadvantage of others. These threats are directly linked to the motivations for engaging into offshoring. In this respect, wage costs play a prominent role. But other factors may also influence offshoring decisions, e.g. regulations, in particular those regarding the environment. Last but not least, offshoring may also entail gains for developed economies through the improvements in the efficiency of production. In this PhD thesis, several causes and consequences of offshoring are examined empirically for Belgium.<p>The first issue that is investigated is whether offshoring of materials and business services affects industry-level employment. An improved offshoring intensity measure is introduced. It is a volume measure of the share of imported intermediates in output split into materials and business services and according to the country of origin of imports, i.e. high-wage and low-wage countries. Estimations of static and dynamic industry-level labour demand equations augmented by offshoring intensities do not reveal a significant impact of either materials or business services offshoring on total employment for Belgium. This result holds for both the manufacturing sector and the service sector and it proves robust to splitting the manufacturing sector into high-technology and low-technology industries.<p>These results raise the question whether there are actually productivity gains from offshoring. Therefore, estimates of the impact of materials and business services offshoring on industry-level productivity in Belgium are presented. Two features of the analysis are new compared to the existing literature on this subject: the issue is examined separately for manufacturing and market services industries and the possibility of forward and backward spillovers from offshoring, i.e. that productivity gains from offshoring feed through to upstream and downstream industries, is investigated. Results show that materials offshoring has no effect on productivity, while business services offshoring leads to productivity gains in manufacturing. Furthermore, there is no evidence of either forward or backward spillovers from offshoring.<p>Despite the absence of an industry-level total employment effect, offshoring may alter the within-industry composition of employment. In this respect, a major concern is the worsening of the labour market position of low-skilled workers. This issue is addressed by providing evidence on the impact of offshoring on the skill structure of manufacturing employment in Belgium between 1995 and 2007. Offshoring is found to significantly lower the employment share of low-skilled workers. Its contribution to the fall in the employment share of low-skilled workers amounts to 35%. This is mainly driven by offshoring to Central and Eastern European countries. Business services offshoring also contributes significantly to the fall in the low-skilled employment share. As a complement to the existing literature, the widely used current price measure of offshoring is compared with a constant price measure that is based on a deflation with separate price indices for domestic output and imports. This reveals that the former underestimate the extent of offshoring and its impact on low-skilled employment. Finally, further results show that the impact of offshoring on low-skilled employment is significantly smaller in industries with a higher ICT capital intensity.<p>Furthermore, attention is drawn to environmental effects of offshoring by asking whether offshoring contributes to reducing air emissions from manufacturing. Indeed, since the mid-90’s, production-related air emissions in Belgian manufacturing have been reduced substantially. It can be shown that the pace of the reduction has been fastest for domestic intermediates. The issue of whether offshoring has played a role in this reduction by replacing domestic intermediates by imported intermediates is widely debated. Here, a decomposition analysis is developed to measure the contribution of offshoring – the share of imported intermediates in total intermediates – to the fall in air emissions for domestic intermediates. Based on the results from this decomposition analysis, it is possible to calculate that 17% of the fall in greenhouse gas emissions, 6% of the fall in acidifying emissions and 7% of the fall in tropospheric precursor emissions in Belgian manufacturing between 1995 and 2007 can be attributed to offshoring.<p>Finally, emission intensities are also considered as a potential determinant of offshoring. An econometric approach for testing the pollution haven effect for imported intermediate materials is developed. The approach is new with respect to the existing literature on pollution havens through its specific focus on imports of intermediates. The test is embedded in a cost function framework from which a system of cost share equations for variable input factors is derived. The set of potential determinants of the demand for imported intermediate materials includes emission intensities for three types of air pollutants. Their impact constitutes a test of the pollution haven effect. The system of cost share equations is estimated by a within ISUR using data for the Belgian manufacturing sector. Results show some albeit relatively weak evidence of a pollution haven effect for imported intermediate materials.<p> / Doctorat en Sciences économiques et de gestion / info:eu-repo/semantics/nonPublished