International service tradability: Understanding the offshoring of services

In industrialized countries, the interest in the internationalization of services remains on centre stage: in the WTO Doha negotiation, the agreement on the pursuit of the liberalization process is at stake because of the fear of job losses. Former studies show that service firms follow two objectives in the internationalization process: to conquer new markets to take advantage of new growth opportunities or to improve global competitiveness by outsourcing specific activities. These two motives now seem to be converging. Therefore, the main challenge is not to stem the direct job losses caused by firms settling abroad, but to evaluate the net result between these job losses and the benefits of the international market expansion in terms of newly created jobs. This chapter explores how service firms are organized and what modalities they use to expand at the international level; analyses the mechanisms of delocalization to identify which factors allow service activities to develop abroad; and discusses the determinants of the international movement of services, which is a first step towards modelling their offshoring probability.

Related Subject(s): Economic and Social Development