Pulling offshore and staying onshore: A framework for analysis of offshoring dynamics

Given that the force of offshoring is one of the most important economic changes in the early 2000s it is vital to understand what propels it further. The landscape of offshoring is such that firms in the wealthy nations (onshore) have already off-shored, sometimes extensively. As researchers, we need to ask not whether the firm will offshore, but rather how far the firm will go offshore and what are the subtle factors that are driving this offshore decision process. Therefore, in this paper we propose a framework in order to understand the firm-level decisions that are not as well understood and not as well researched. There are a number of key variables that we already collectively know about offshoring. First, we already know that offshoring is driven by low wages and large labor pools in India, China and elsewhere. Thus, everything else being equal, work will flow to the less expensive offshore locations.