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shifted to ITC services, the importance of the new member states falls
to only 8%, while old member states account for 57% of the cases of
international sourcing. India, a country typically identified as a destination
for ITC outsourcing in the popular press and in qualitative research, is
identified as a source country in 12% of the cases of ITC sourcing, in
comparison with only 5% of the international sourcing cases for core
functions. International outsourcing of R&D and engineering functions
is also concentrated in Western Europe (42%) with China (9%) and
“other Asian” countries (8%) playing a larger role than in ITC services.
Interestingly, the role of India in R&D outsourcing is very small. The
combined shares of marketing, distribution and administrative functions
show a more balanced pattern across locations.
The results presented here are largely unsurprising. They
confirm both qualitative GVC research and to some extent, popular
perceptions. Of the business functions that are sourced outside of
Denmark, 30% to 50% are outsourced to independent suppliers, a
substantial but not dominant share. Existing affiliates provide most of
the in-house international sourcing, but international acquisitions and
the establishment of new “greenfield” facilities are not unheard of. Core
functions, mostly manufacturing, are most commonly outsourced and
offshored, followed by ITC services. Functions based on tacit and local
knowledge, such as marketing and sales, engineering, and R&D are less
likely to be internationally outsourced or offshored. Most international
sourcing by Danish firms is within Europe, but China is a popular
location for sourcing core functions (mainly manufacturing). While
India is more likely to be a source location for ITC service functions
(12% of cases) than for core functions (5% of cases), it is notable that
the majority (57%) of instances of international ITC services sourcing
are to the original 12 member states of the European Union.
While it is important to have our impressions confirmed, the
greater value of these data is that they establish a baseline for future
research. Is the practice of outsourcing to independent suppliers
becoming more prevalent Will India grow as a location for ITC
sourcing at the expense of old European Union member states Will the
outsourcing of engineering and R&D functions grow, and if so, where
Will service-producing firms increase the outsourcing and offshoring
of core functions [operations] If these are trends, then how quickly
will they progress Will Eastern Europe lose out to East Asia Such
questions comprise some of the most pressing policy questions of the
day. When and if new rounds of business function data are collected, we
will be in a much better position to provide answers.
28 Transnational Corporations, Vol. 18, No. 2 (August 2009)