Offshoring Based On FDI: Determinants And Impact

Service Industry transfer has become an obvious character of new economic globalization. It goes in two main ways, FDI in Service and Offshoring. In which, Offshoring by Transnational Corporations (TNCs) based on FDI is an important method. Considering its Ownership Advantage and Location Advantage in host country seriously, The TNCs decide what services function and how to offshore. The offshoring based on FDI exercises a great impact on both home country and host country. The TNCs offshoring based on FDI in China can enhance the employee's wage, improve the industry technology and optimize the industry structure efficiently and effectively. Thus, it is meaningful to study the location determinants of offshoring based on FDI and the impact on home and host country, particularly take China as the study object.This paper study the TNCs Offshoring based on FDI and make comprehensive and systematic studies about the TNCs offshoring in service through empirical analysis and econometric analysis. Firstly, The paper shows some basic theories of FDI in service and several new viewpoints in offshoring study field and introduces the background of development of FDI in service, some basic concepts related to offshoring, what function and how to offshore; Then, taking the front-office functions (call/contact centers), back-office services (shared service centers), IT services (software research etc.) and regional headquarters for examples, it focuses on the location determinants and analyses the offshoring impact on home country and host country in details; Lastly, and the last chapter seeks the China's location determinant for attracting more TNCs offshoring and its impact on China by the analyses of co-integration analysis and Granger causality test on the basis of the correlative data. It concludes that Market growth, ICT development and Infrastructure improvement are main factors; skilled workforce availability with lower cost and Regulated business climate give much supports. However, offshoring do not fill the role of fueling economic growth enough as it should be in China.