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ECONOMIC POLICY INSTITUTE 2003. EPI Issue Guide: Outsourcing (Available at www.epi.org/content.cfm/issueguide_offshoring).

This is intended as an introduction to the subject. It contains a section on the following frequently asked questions.

" Why are people worried about white-collar offshoring?
" How does offshoring fit in with larger trends in white-collar work?
" Won't offshoring fade as an issue once the economy recovers?
" What is driving white-collar offshoring?
" How much will the US economy gain from white-collar offshoring?
" Who benefits from offshoring?
" Isn't offshoring compensated for by 'inshoring'?

Using data from the Bureau of Labor Analysis, the Bureau of Economic Analysis, and NASSCOM, the paper presents 14 tables related to unemployment and employment rates in the United States for various age groups and occupations, salary by occupation and industry, demand for software investment, trade surplus for the United States as a whole and for the service sector, change in software-related jobs, labor compensation and corporate profit sharing of income growth during economic recoveries, and jobs related to foreign ownership of companies in the United States.

ECONOMIC POLICY INSTITUTE. 2004. The State of Working America 2004/2005: Recovery Yet to Arrive for Working Families. Press Release (Sept. 5) (Available at www.epinet.org/books/swa2004/news/swa2004_release_final.pdf").

This press release provides data on the condition of the US economy and the state of jobs, wealth, and living standards for US workers. This report provides a context for understanding offshoring.

THE ECONOMIST. 2005. The Bangalore Paradox. The Economist (April 21).

The article describes the infrastructure and other problems facing Bangalore, which may harm its ability to grow its offshoring business. Problems include the local government not following through on building infrastructure such as the delayed work on the new international-quality airport, a water shortage, inadequate sewers, an erratic power supply, shortage of hotel rooms and quadrupling in the cost over five years for luxury hotel rooms, higher prices than other major cities in India, new business taxes introduced by the city, pot-holed roads, and roads that cannot handle the higher capacity in what has become the fastest growing city in India with a current population estimated at 7 million.

THE ECONOMIST. 2005. Time to Bring it Back Home? The Economist (March 3).

This brief article discusses the growth in the offshoring business in Europe. According to the consulting firm TPI, Europe was the source of 49% of the worldwide outsourcing contracts valued at over 40 million Euros, while the United States held only 42% of the market. Whereas the British market was already mature, companies in Continental Europe, especially in Germany, are beginning to offshore work in rapidly increasing amounts. The outsourcing business has been dominated by six US firms (Accenture, ACS, CSC, EDS, Hewlett Packard, and IBM), but their market share has dropped and European firms such as Siemens and Capgemini are on the rise. BPO is the fastest growing sector, especially for human relations, but it still remains only about one-third BPO work and two-thirds IT service. In a survey by Bain & Co., 82% of large firms in Europe, Asia, and the North America are outsourcing, 51% are offshore outsourcing, and almost half that outsource claim that it does not meet their expectations.

EDEN, L. 2005. Went for Cost, Priced at Cost? An Economic Approach to the Transfer Pricing of Offshored Business Services. Texas A&M University. Bush School Working Paper 570 (May).

The paper considers the implications for national tax administrations and for corporations of transfer pricing decisions, that is, the pricing of products traded between units of a multinational organization. The paper was motivated by the rapid increase of such trading because of offshoring. The paper presents an economic analysis of a case study from the teleservices industry. The author finds that, although companies went for cost and stayed for quality, as far as transfer pricing is concerned, companies should go for cost and price at cost in the offshored business services industry instead of using OECD transfer pricing guidelines that require multinationals to treat transfers as though they were being made by unrelated entities.

THE EDUCATION FOR INNOVATION INITIATIVE 2005. Tapping America's Potential. Distributed by the Business Roundtable Washington, DC. (July).

Fifteen major business organizations are concerned about the ability of the United States to sustain its scientific and technical superiority. The report cites various statistics about foreign competition from Asia, lack of US student interest in engineering, declining US student achievement in math problem-solving skills, and declining federal investment in R&D. The coalition recommends building public support for making improvements in math and science performance a national priority, motivating students and adults through incentives to enter science and technology careers, upgrading K-12 math and science teaching, reforming visa and immigration policy to attract and retain bright science and engineering students from around the world, and boosting funding for basic research especially in the physical sciences and engineering.

EGGER, H. AND EGGER, P. 2001. International Outsourcing and the Productivity of Low-Skilled Labor in the EU. WIFO-Working Paper 152. (Available at publikationen.wifo.ac.at/pls/wifosite/wifosite.wifo_search.frameset?p_filename=WIFOWORKINGPAPERS/PRIVATE539 7/WP152.PDF).

From paper abstract. This paper presents first insights into the role of international outsourcing on the productivity of low-skilled workers in manufacturing. In the short run, international outsourcing exhibits a negative marginal effect on real value added per low-skilled worker, the long-run parameter estimates reveal a positive impact. This may be explained by imperfections on European and goods markets which prohibit an immediate adjustment in the factor employment and the output structure. The change in the outsourcing intensity since 1993 alone accounts for a long-run increase of about 3.3% in the real value added per low-skilled worker.

EGGER, H. AND EGGER, P. 2003 Outsourcing and Skill-Specific Employment in a Small Economy: Austria after the Fall of the Iron Curtain. Oxford Economic Papers 55, 4, 625-643).

Abstract from the paper. We set up a model in which firms in a small industrialized country outsource part of their production to a foreign economy that is rich in low-skilled labor. We analyze how a decline in trade costs affects outsourcing activities and the production structure in the small economy. A stimulation of cross-border outsourcing raises wage dispersion and, if labor markets are unionized, also the employment of high-skilled relative to low-skilled labor. Using a panel of Austrian industries, we find, first, that decreasing trade barriers-as observed after the fall of the Iron Curtain-indeed stimulate outsourcing to Central and Eastern Europe and the former Soviet Union, and, second, that outsourcing to these countries significantly shifts relative employment in favor of high-skilled labor.

EGGER, P., PFAFFERMAYR, M. AND WOLFMAYR-SCHNITZER, Y. 2001. The International Fragmentation of Austrian Manufacturing: The Effects of Outsourcing on Productivity and Wages. North American Journal of Economics and Finance 12, 257-272.

Abstract from the paper. Since the fall of the Iron Curtain, Austria and other small, open Western European countries have increasingly outsourced part of their production to the Eastern transition countries. This study assesses the effects of fragmentation of Austrian manufacturing on total factor productivity and mandated factor prices. Outsourcing to the East significantly improves domestic growth in total factor productivity but possibly less in low-skill, labor-intensive industries and more in capital-intensive ones. Estimates of the mandated wage regressions suggest that, in the presence of perfect factor markets, wages would be lower for low-skilled workers and higher for high-skilled workers as a result of outsourcing.

ELECTRONIC ENTERTAINMENT POLICY INITIATIVE 2005. The Camel Fully Enters the Tent. (June) (Available at www.eepi.org/archives/eepi discuss/msg00109.html).

An exploit for the Sony PSP is discussed, which allows the execution of unsigned and unofficial programs. The author believes that, "Such a simple, practical execution exploit will open the homebrew development floodgates (full-featured Web browsers, Linux, etc.), and likely the piracy floodgates as well."

ELECTRONIC INDUSTRIES ALLIANCE. 2004. The Technology Industry at an Innovative Crossroads: A Policy Playbook Addressing the Future of the U.S. High-Tech Innovation Economy .

This study is not specifically about offshoring, but instead about "structural changes taking place in the world economy and in the high-tech industry in particular." However, the cover letter by Dave McCurdy (president) and Ronald Turner (chairman) mentions offshoring particularly: "Our biggest concern is not offshore outsourcing, but that demagoguery and political overreaction to this business practice - which, by the way, is not new - will lead to protectionist policies. The lack of an overarching vision, combined with inadequate investment in innovation, contributes to short-term and false choices that could potentially lead to the critics' prophecies of inevitable Chinese or Indian economic dominance." This study takes "a broad look at the benefits of open markets and the trends in high-tech manufacturing, design, engineering, and research & development." Information was gained through forums, surveys, and executive interviews. The report makes about 50 recommendations, falling into six areas: " working with US trading partners to ensure open markets and fair and secure trading environments, " visa and immigration policy reform, " improving the US business landscape, including tax and regulatory reforms, " encouraging continual skills training and worker education, " improving the K-12 system, " making basic research a funding priority.

ENGARDIO, P. AND EINHORN, B. 2005. Outsourcing Innovation. BusinessWeek Online (March 21).

The article describes the movement of research and development for the consumer electronics industry to India, China, and other Asian countries. Although this article is not directly pertinent to this report, it identifies trends that might also pertain to R&D in the software industry. Some of the topics include the determination of what is core proprietary knowledge that is to be developed in-house, and what is commodity technology that is to be offshored; the competitive pressure to hold costs down by simply purchasing completely designed products from Asian offshorers rather than working with them to customize the client firm's design (especially in consumer electronics hardware); the shrinking of corporate R&D budgets as a way to trim costs; the demand from national retailers for product companies to offer full product lines with fresh products at every price point (thus representing a substantial R&D investment for products with short shelf life); and the economic risks of high sunk costs in the design of new consumer products for a fickle public.

ENGARDIO, P., PULIYENTHURUTHEL, J., AND KRIPALANI, M. 2004. Outsourcing: Fortress India. Business Week Online (Aug. 16) (Available at www.businessweekasia.com/magazine/content/04_33/b3896073.htm.

From the article: After rushing to shift telemarketing and back-office work to India in recent years to tap low wages, U.S. and European companies are under growing pressure from regulators and legislators to guarantee the privacy of their customers' financial and health-care data… Some call centers like Mphasis make sure that computer terminals lack hard drives, e-mail, CD-ROM drives, or other ways to store, copy, or forward data. Indian accountants only view data from U.S. servers for specific tasks. Video cameras watch over the sea of cubicles. Every phone conversation is recorded and can be monitored on a system installed by Melville (N.Y.)-based Verint Systems Inc. And since data theft is often committed by disgruntled former employees, Mphasis can lock a staffer out and cut access to PCs and phones three minutes after a resignation.

EUN, J-H., LEE, K., AND WU, G. 2005. Explaining the University-Run Enterprises in China: A New Theoretical Framework and Applications. (Jan.) (Available at www.ciber.gatech.edu/workingpaper/2005/019-05-06.pdf. Accessed Sept.)

Abstract from paper. This paper departs from the critique that both the "Triple Helix" and the "New Economics of Science," which assumes typical situations of advanced countries, fail to provide a satisfactory theoretical framework to address the university-industry relationship in developing countries. The lack of a suitable theoretical framework has resulted in, at least in part, the confusion over the right role of the university and the desirable university-industry relationship in China where universities used to set up and run manufacturing firms (i.e. university-run enterprises, or UREs). In order to fill in the gap in research on the university-industry relationship in developing countries, we constructed a new conceptual framework by synthesizing the "theories of the firm" (especially a Resourced-Base View of the firm) with the literature of the university-industry relationship. The conceptual framework, which consists of macro-level framework and a micro-level one, is based on the notion that the URE could be seen as an alternative governance form of knowledge industrialization. With the framework, we explained why the UREs emerged, prevailed, and eventually began to decline in China. Furthermore, via the concept of "absorptive capacity," we extended the conceptual framework to make it possible to address the "knowledge industrialization (or forward engineering)" along with "reverse engineering" and "inter-firm learning," which are distinct strategies for technological catch-up. Within the extended framework, we contrasted evolutionary paths of Japan and Korea with that of China and drew some policy implications.

EVALUESERVE 2004. Global Sourcing: What does the US Economy Gain? Evalueserve (Feb. 10).

Modified from the report introduction. An in-depth analysis of the impact of global sourcing in three industries, i.e., the call center industry, the IT services industry, and the IT-enabled services industry, has been conducted. The report found that the displacement of a number of jobs is inevitable in the short term, but the overall impact is positive for the US economy. In order to minimize even these short-term effects, more programs for retraining and upgrading worker skills should be introduced.

EVALUESERVE 2004. Global Sourcing Imperative in the UK Economy: 1993-2010. Evalueserve (Feb. 11).

The inevitability and necessity of global sourcing services in the United Kingdom is discussed. Global sourcing is said to enable the UK economy to overcome the expected labor shortfall during 2003-2010 as well as maintain its economic growth. The benefits of immigrant workers who have helped the UK economy is also mentioned.

EVALUESERVE2004. Status of BPO Industry: Present and Future. Evalueserve (July 13).

From the report's introduction. This paper focuses on some major countries that will offshore their work and destinations that will receive this work during the next seven years. The scope of the paper is limited to the offshoring of BPO jobs only and does not include IT services. US firm are expected to take the lead in global offshoring, while the Philippines and China are the major destinations that will attract offshored jobs in the near future.

EXPRESS COMPUTER2002. SISL Grows out of Parent's Shadow. (July 1) (Available at http://www.expresscomputeronline.com/20020701/company1.shtml. Accessed Aug.)

The article gives a profile of Siemens Information Systems Limited which is a major player in the Indian software industry and a subsidiary of the German-based multinational firm Siemens. The article discusses its various businesses, including healthcare, telecom, scientific applications, graphics products, and business solutions.