Abstract
Due to unique task characteristics, different location requirements exist, which ultimately lead to unique location considerations. Based on our research, five decision factors are identified for service offshoring: wages, education, infrastructure, cultural distance, and corruption. Considering these decision factors, efficiencies for the offshoring locations are computed with a data envelopment analysis from a German point of view. The research concludes that the most efficient service offshoring countries, with an average efficiency of 97 %, are the Netherlands, Switzerland, the United Kingdom, and the United States.
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Notes
- 1.
It yet has to be acknowledged that these chosen inputs may be extended by additional factors such as a country’s legal system. Data privacy or patent protection may significantly influence a location’s attractiveness. Nevertheless, the chosen input factors are perceived to be the most prevailing aspects and additional ones may add value but solely marginally and thus do not influence the research findings.
- 2.
The calculations refer to the offshoring potential of the eight most relevant industries which are packaged software, IT services, retail banking, insurance, pharmaceuticals, automotive, healthcare, and retail.
- 3.
According to Business Monitor International core emerging markets include Mexico, South Korea, Turkey, Vietnam, Poland, Hungary, South Africa, Nigeria, Russia, China, India, Brazil, and Indonesia.
- 4.
The exchange rate of the 8th of June 2010 has been utilized to convert the figures to euros (0, 8384 USD/EUR).
- 5.
Commercial service exports as well as computer, communications, and other service exports are initiated by the World Bank in US dollars. For the use of the following DEA, these values are converted to euros using the exchange rate of the 8th of June 2010 (0, 8384 USD/EUR).
- 6.
All four models ranging from A to D utilized exactly the same five input factors, namely hourly wage costs, infrastructure investments, secondary education enrollment, cultural distance, and corruption perception. For the output measure Model A applies service FDI investment in the respective host country, Model B utilizes commercial service exports as well as information and communication service exports, while Model C and D consider these two exports measures, respectively, on their own.
- 7.
Wage efficiency scores are conducted by utilizing wage data issued by UBS (UBS 2009, p. 26). Infrastructure scores are calculated by conducting information and communication expenditures issued by the World Bank. (World Bank I 2010a) For education efficiency, the number of pupils enrolled in secondary education is applied issued by UNESCO (UNESCO 2010) while cultural distance efficiency scores are based on Hofstede’s cultural dimensions research. (Hofstede 2010) Political environment efficiency scores are calculated by using the corruption perception index computed by Transparency International (Transparency International 2010).
- 8.
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Fraunhoffer, R., Karna, A., Täube, F. (2013). The Service Offshoring Code: Location Efficiencies for German Firms. In: Pedersen, T., Bals, L., Ørberg Jensen, P., Larsen, M. (eds) The Offshoring Challenge. Springer, London. https://doi.org/10.1007/978-1-4471-4908-8_13
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