The Economic Effect And Strategies For Undertakinging Service Outsourcing Industry In China

From the later 20th century, some multinationals in the developed countries, for the sake of reducing the cost and increasing their core competiveness, transfer by means of contracts their none-core services to their counterparts in the developing countries, thus step by step service outsourcing has become a major impetus for a new round of industry shift in the world economy. Not only does service outsourcing industry belong to a knowledge and skill incentive industry, but an environment-friendly, green and low-carbon one as well which is characterized with high information and technology capacity, big added value, low consumption of resources, little environment pollution, strong employment capacity and a high international level. Therefore, vigorous development of service outsourcing would be of vital significance for China to promote the way of transference of economic development, to optimize industrial structure, to drive technology progress and to expand employment especially the employment of graduates.This dissertation focuses on the economic effects and strategic measures for China's undertaking service outsourcing. Six Chapters comprises of the dissertation and they are as follows:Chapter 0 is the Preface, where the background and significance of analyzing the economic effects and strategic measures on undertaking service outsourcing in China are indicated. Also, theoretical tools and research methods used in the dissertation, the outline of composition, objects to be studied and the structure of the paper are explained in this part.Chapter 1 indicates a document commentary and theoretical basis for the research of service outsourcing. On the basis of a comparative analysis on and definitions of outsourcing, manufacturing outsourcing and service outsourcing, this Chapter summarizes the latest researches by the scholar's home and abroad on the economic effect on the service outsourcing. In the mean time, the economic theoretical basis for the origin and development of the service outsourcing are sought by virtue of the theory of transaction cost, the theory of industrial value chains, the theory of intra-product specialization and the theory of contract economics. And finally a comprehensive comparative analysis on the domestic and foreign research on this point is made and emphasis is attached on the necessity to conduct a further study in the field.Chapter 2 comparatively researches the development of the service outsourcing in the world. This Chapter gives an all-round way analysis from three angels on the current status and the development trend of global service outsourcing industry. Angel One views on the global market of service outsourcing and make full use of the statistics and predicted data by international organizations and some top service outsourcing research and consultancy companies, and summarizes the general scale, market structure and features and the development trend of global service outsourcing. Angel Two looks at India, the biggest undertaker of offshore outsourcing service in the world, to review the history, current status and experiences of development and to thoroughly analyze its problems also so as to seek the revelation for developing the service outsourcing industry in China. And Angel Three makes an introduction to the history, current state and trend of the development of the service outsourcing in China, serving as a necessary precondition for the discussion in the next part.Chapter 3 presents the industrial structure effect of undertaking the service outsourcing in China. The Chapter discusses some viewpoints by Chinese and foreign economists concerning escalation of industrial structure, summarize the general principals about improvement and evolution of industrial structure and reviews the evolution history of industrial structure from China's reform and opening-up. In this Chapter special emphasis has been put on the significance of undertaking the service outsourcing to improve the industries of manufacturing and service. It is commented that undertaking the service outsourcing could provide manufacturers with satisfactory and efficient and cheap productive service and help them focus on their core business, so as to promote the shit of China's manufacturing to a higher level. The development of the service outsourcing also could increase the catalogue and expand the scale of modern service industry, enlarge utilization of foreign investment and strengthen the service outsourcing enterprises in China; as a result, help the tertiary industry grow from traditional labour-intensive service industry to capital, technology and knowledge-intensive modern service industry. The possible negative effects are also touched in this Chapter on the improvement of manufacturing and service industries during undertaking the service outsourcing. It is pointed out that Chinese entities need to avoid the risk of being fixed by multinational corporations on the low-end positions of the industry value chain. Finally, the Chapter also discusses the bad influences on the growth of industrial structure due to the cut-throat competitions while undertaking the outsourcing businesses and analyzes the possibly more serious income-gap problem among different areas and departments when the service outsourcing industry grows.Chapter 4 is about the effect of technological progress on the development of the service outsourcing in China. The Chapter, along with the track of the theory of classic economic growth, the theory of neo-classic economic growth and the theory of neo-economic growth, explains the formation and evolution of the theory of technological progress. On the basis of the theory of knowledge management, the promotion mechanism about how the undertaking side gets technology progress through the service outsourcing is investigated in this part, and it is indicated that the socialization, externalization, combination and internalization of implicit and explicit knowledge between service outsourcing undertakers shapes a virtuous cycle of the continuous transformation between knowledge and information, in which service outsourcing undertakers keep learning and absorbing advanced knowledge and technologies from the outsourcers and lift their technologies in the end. In addition, the major factors influencing the progress of outsourcing technologies of China are looked into from both outsourcers and our own undertaking entities. The restraints from outsourcers mainly lie on the limited kinds of outsourcing, technological block in the outsourcing countries and the strategies and goals of the outsourcers. The limitations originating from our own side are poor development of the mating industries for the outsourcing, the technological gap between China and the outsourcing countries and the weak capacity to intake the advanced technologies and further to innovate. Next, the Chapter gives an analysis of the preferred ways to accomplish technological progress for China by means of the service outsourcing, namely demonstration effect, human capital outflow effect, industry relating effect and industry agglomeration effect. Chapter 5 talks about employment effect of undertaking the service outsourcing. The analysis mode for international trade by Paul Samuelson is used in this Chapter to explain the economic rules on the employment effect of the service outsourcing. It is indicated that the service outsourcing is also the outcome of seeking labor interest arbitrage in the world by the multinational corporations in those developed countries, and in a short term this in turn would have some job opportunities in the service sector in developed countries flow into the undertaking countries and further influence the salaries of these workers and reduce their incomes. However, in a long run, the shifted surplus labor from the outsourcing countries would go into the sectors where there are higher labour productivities. Then the loss from outsourcing could be written off and more values could be created, which promotes a further progress of society and economy. Therefore it is not difficult to see the service outsourcing is new international win-win cooperation both for the outsourcing countries and the undertaking countries. The employment effects of the service outsourcing in China are mainly expressed as follows:(1) more job opportunities might be created and the employment in the service sector might be expanded as well; (2) the employment in the sectors of national economy other than the service sector could be improved by means of industrial correlation effect and employment multiplier effect; (3) the labor productivity and the employee income would be lifted. This Chapter in the end analyzes the supply and demand of the talents in the service outsourcing sector and points out that in China the demand of the talents for the service outsourcing is very high and the reserve of talents in this field is also quite enough, but there is not an appropriate chain of transformation. The training of talents for the service outsourcing is just an effective way to transform these human resources. Undergraduates with English, computer sciences and other academic background who are seen as the potential service outsourcing talents could become mature and handy outsourcing talents after a short time training of outsourcing.Chapter6 puts forward strategies for undertaking service outsourcing industry in China. This chapter introduces the optional evaluation system in outsourcing service of the company of A. T. Kearney, the consulting company of Gartner and Hewitt. Based on the above datas, the priorities of the outsourcing service in China include the support of the government, perfect infrastructure, relatively cheap labor and large-scale manufacturing. On the other hand, the disadvantages of the outsourcing service in China are obvious, such as the shortage of high-quality outsourcing service talents and large scale enterprises, the poor protection of the intellectual property, the low cultural compatibility between China and the western countries, and the lack of national trade association. Finally, this thesis argues that China should fully take the advantages of manufacture and vigorously develop the productive outsourcing service to bring forth the overall upgrade of manufacturing. Therefore, in the process outsourcing service, we should pay much attention to the technological digestion and absorption to continuously improve China's industrial technology level; we should strengthen the vocational training of the outsourcing service talents in order to cultivate a great quantities of qualified compounding talents; we should do well in intellectual property legislation to create a good legal environment for the development of the outsourcing service; we should implement the strategies of large-scale enterprise to create a series of well-known outsourcing service enterprise with strong international competitiveness.Chapter7 is this dissertation's conclusion and outlook.This chapter summaries the study on the economic effect and strategies for undertakinging service outsourcing industry in China and points out the direction for further research.The possible innovation of this thesis may have the following three aspects:1.Using comparative analysis and historical research methods, reviewing India's development course of service outsourcing, the thesis not only concludes India's successful experience of developing service outsourcing, but also explores it's existing problems and potential risks, provides beneficial references for the development of China's service outsourcing from positive and negative way.2. Using the dynamic fusion relationship between services and manufacturing, utilizing the upgrading theory of industrial structure, the thesis explores the internal mechanism of productive service outsourcing driving manufacturing upgrading. Using within industry upgrading theory, the thesis explores the mechanism of China's undertaking service outsourcing prmoting traditional labour-intensive services rising to the capital, technology and knowledge-intensive services.According to the new economic growth theory, such as Arrow's "Learning by doing" and Romer's "knowledge spillovers", using SECI theory model of knowledge management theory, the thesis explores how the undertaking side gets technology progress through the service outsourcing. The analysis mode for international trade by Paul Samuelson is used in this Chapter 5 to explain the economic rules on the employment effect of the service outsourcing. It is indicated that the service outsourcing is also the outcome of seeking labor interest arbitrage in the world by the multinational corporations in those developed countries.3.Considering China's national conditions and practical basis, we should make full use of our existing manufacturing strengths, vigorously develop productive service outsourcing,as quickly as possible realize the transformation from a manufacturing power to manufacturing power; we should do well in related industries, strengthen the abilities of digesting and absorbing the imported technologies and of improving the innovation in order to fully using the technological progress effect of the outsourcing service; and we should strengthen the work of college graduates'internship, practice and vocational training so as to turn the potential talents of outsourcing service into the talents who are useful to the enterprises.