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1.2. Previous research

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The literature regarding offshoring is replete with analysis from either side extolling or decrying the effects of implementation. It is clear that many of these analyses come from those who have a stake or ideology that drives their perspective.

The issue has generated a number of studies on a wide range of topics such as its impact of offshoring on GDP, inflation, trade, consumers, productivity, wages, and employment. Studies have also addressed the underlying reasons for offshoring, such as companies seeking cost savings and revenue growth. Much of the early effort has come from management consulting firms, most notably McKinsey Consulting and Forrester Research.

While some researches focus on the opportunities of offshoring for value creation for both companies and the economy as a whole, others focus on the threats and have a more critical perspective on offshoring. Researchers from the offshore countries, such as Khan et al (2002), tend to emphasis the cost and resource benefits to be gained from the practice. Risks are downplayed in most these researches. Lee and Kim (1999) find empirical support for the hypothesis that partnership quality, information sharing, communication, and top management support are key predictors of outsourcing success.

The academic literature has also weighed in with a variety of studies examining the phenomenon from the perspective of the source country. The majority of these researchers focus on risks, highlighting failures and hidden costs, they argue that the phenomenon results in job losses and wage erosion. In their view specific companies may well benefit, but this is not the case for the welfare of countries or workers as a whole (Levy, 2005). Pinto et al (2005), for example, argue that the estimated labour savings may be predicated on unrealistic assumptions, that setting up and coordinating work that is done half a world away entails new costs and that monitoring quality control at a remote location may be difficult.

What both perspectives have in common are that the offshoring trend will continue to be an issue on the strategic agenda of companies and to have an impact on the competitiveness of nations (Garner, 2004; Doh, 2005). The challenge is not whether to participate in this trend, but how to do so.

Finally, research on offshore outsourcing in IT tends to concentrate on the USA rather than Europe. This may be because offshoring of white collar work has a longer history there, and its impact has been particularly strongly felt in regions where employment in the technology sector is concentrated, such as California (Round, Lovegrove, 2005).

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