Abstract

Offshoring and offshore outsourcing, the movement of work and tasks to low-cost countries, has been increasing in scale and scope. Offshoring in the manufacturing sector has been an ongoing phenomenon for more than forty years. More recently, examples of offshoring in services industries such as software, once considered non-tradeable and therefore immune to offshoring, have emerged. The concurrent effects of very rapid growth of the Indian and Chinese economies and dramatically lower international cross-border transaction costs have the potential to change the structure of many industries. Some have called this as historic an economic transformation as the Industrial Revolution (Blinder, 2006). Offshoring has already transformed a number of industries. On the manufacturing side, in response to pressures from foreign competitors, U.S. semiconductor firms were able to take advantage of labor in low-cost countries by modularizing their value chains (Sturgeon, 2006). By modularizing, they could isolate pieces of the value chain and site them in the most efficient geographic locations. Very labor-intensive tasks such as assembly were first moved offshore, and later foundries were moved to more efficient locations, while high-level design was kept closer to customers (Brown & Linden, 2005). Similarly the U.S. automotive industry has been able to improve its competitive position by moving some of its labor-intensive production to Mexico to lower its costs. On the services side, certain industries are being transformed very rapidly. In a span of about three years, the American IT services industry has adopted a “global delivery model,” in which customers expect bids on projects to have blended rates, including both on-site and offshore labor components. These projects do not reflect a simple division of labor, where the work completed on-site is high-skill and the offshore work is low-skill. Instead, major companies are creating product-specific centers in low-cost countries that will serve customers throughout the world. For example, IBM has announced that Bangalore will be the global home for its Service Oriented Architecture (SOA), a strategic business segment it expects will grow rapidly over the next decade (Global News Wire, 2006). The printing industry has characteristics similar to both manufacturing and services industries. Like manufacturers, printers produce tangible goods, but like services providers, the products delivered are often highly customized, requiring co-production by customer and printer. As a result, increased international cross-border trade, especially with China and India, will affect the printing industry in distinctive ways. The goal of this paper is to better understand how the offshoring phenomenon is playing out in the printing industry. Because of the high number of small firms in the printing industry and thus the lack of public data, and because of the complex nature of the industry itself, there is much to be understood about how offshoring is affecting U.S. printers. This problem is magnified for the lack of data on service offshoring (Sturgeon, 2006). Printers and their suppliers are keenly interested in how globalization and offshoring are impacting their industry. The fact that China and India have emerged as market sources as well as competitors has been a frequent topic in trade publications and industry conferences. In this paper we will offer a number of hypotheses, review descriptive survey data on the industry, test the hypotheses with this data, and expand these quantitative findings with interview data.

Publication Date

2007

Document Type

Full-Length Book

Comments

A Research Monograph of the Printing Industry Center (CIAS) at RIT

Department, Program, or Center

Printing Industry Center (CIAS)

Campus

RIT – Main Campus

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