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An Overview of the Economics of Outsourcing

economics and outsourcing

Rapid advancements in Information and Communications Technologies (ICT), along with reductions in barriers to cross-border trade and factor flows, have worked in tandem to promote cross-border production sharing. This slicing of the value added chain in manufactured goods has been going on for several decades in Asia and elsewhere. However, many services activities and processes are also becoming fragmented from the actual production process and are taking place in different geographical locations, both within and outside a country. The phenomenon whereby an entity located in one country might disperse some of its service activities (or parts thereof) to one or more other countries has been broadly termed “offshoring” or “outsourcing”.

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