Offshoring of Services from Developing Countries

Abstract

Offshore outsourcing of services accelerated at the end of 1990s in developed countries. Recently developing countries have also increasingly offshored services, not only to developed countries but also to other developing countries. Yet, to date little attention has been paid to the emergence of this reverse offshoring. This paper examines the determinants of offshoring of services from developing countries; as such the authors investigate what location factors drive these firms from developing countries to offshore services. Using data on service offshoring projects during 2001-2007 originating from developing countries, the authors found that the determinants of offshoring of services from developing countries followed similar patterns of conventional offshoring yet for different reasons. In addition, the authors also found that services offshoring from developing countries in some sectors appeared to occur because of the desire to be closer to customers.