The Dimensions of Territorial Embeddedness of the Business Services Sector in Central and Eastern Europe
DOI:
https://doi.org/10.15678/ZP.2021.56.2.02Keywords:
business services, territorial embeddedness, global value chains, wages, labour productivity, skillsAbstract
Objective: The purpose of this article is, first, to propose a range of measures of territorial embeddedness in order to describe the phenomenon in question, and, second, to use the se measures to determine the level and dynamics of the embeddedness of the Business Services Sector (BSS) in Central and Eastern European (CEE) economies. Research design & Methods: In the debate about the future of the BSS in these low-cost economies, two challenges have been identified. The first one involves the threat of relocation. The other one is associated with linkages between service companies and local customers/suppliers weaker than that of in Western Europe. These two challenges can be addressed by tackling the third one, namely the increasing of process efficiency. In consequence, even an increased share of foreign contractors does not have to reduce the scale of cooperation with local entities. In the empirical part of this paper, changes in these three areas that make up territorial embeddedness are explored in depth. Eight divisions covering the BSS in the CEE-11 countries were compared with their Western European counterparts (the EU-17) at two points in time, i.e. in 2000 and in 2014. The study relies on basic statistical data and calculations with the use of the World Input-Output Tables. Findings: It was found that due to productivity growth, the cost competitiveness of the BSS in CEE countries was maintained in the period of interest. Moreover, despite the growing internationalisation of the sector, the scale of cooperation of the BSS with local actors has increased. The rapidly improving skills of employees in the Central European BSS – as well as the growing importance of knowledge-intensive services (KIS) in the structure of value added – can further contribute to the importance of CEE as a location for business services in Europe. Implications/Recommendations: The studied period saw an improvement in the structure of value added, as an increasing share of it was accounted for by knowledge-based services. This implies a high probability of further productivity growth of the BSS in CEE, and bodes well for the degree of territorial embeddedness both in terms of decreasing the likelihood of relocation and amplifying the capacity of local actors to act as the suppliers and the recipients of state-of-the-art services. Contribution/Value Added: I have recognised that when service provision is subject to massive offshoring, it is not so much the intensity of service provision (exports) as the intensity of value added creation in the local economy that is of significance. Moreover, the relative gains in this respect should determine the scale of territorial embeddedness, the competitiveness of individual sectors, as well as their growth prospects.Downloads
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References
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Bair, J. (2005). Global capitalism and commodity chains: Looking back, going forward. Competition & Change, 9(2), 153–180.
Baldwin, R. (2012). Global supply chains: Why they emerged, why they matter, and where they are going CEPR Discussion Papers 9103. Discussion Papers: CEPR.
Baldwin, R. (2019). The globotics upheaval: Globalization, robotics, and the future of work. Oxford University Press.
Baldwin, R., & Lopez‐Gonzalez, J. (2015). Supply‐chain trade: A portrait of global patterns and several testable hypotheses. The World Economy, 38(11), 1682–1721.
Białynicki-Birula, P., & Pacut, A. (2020). The determinants of territorial embeddedness of offshoring and outsourcing firms: A conceptualisation of the problem. Outsourcing in European Emerging Economies, 28–37. Routledge.
Chang, H.-J. (2012). 23 things they don’t tell you about capitalism. Bloomsbury Publishing USA.
Coe, N. M., & Yeung, H. W.-C. (2015). Global production networks: Theorizing economic development in an interconnected world. Oxford University Press.
Dicken, P. (2015). Global shift. Guilford Press New York.
Domański, B., & Gwosdz, K. (2009). Toward a more embedded production system? Automotive supply networks and localized capabilities in Poland. Growth and Change, 40(3), 452–482.
Ernst, D. (1998). Catching-up crisis and industrial upgrading: Evolutionary aspects of technological learning in Korea’s electronics industry. Asia Pacific Journal of Management, 15(2), 247–283.
Fagerberg, J. (1996). Technology and competitiveness. Oxford Review of Economic Policy, 12(3), 39–51.
Fagerberg, J., & Godinho, M. (2004). Innovation and Catching Up. In J. Fagerberg, D. Mowery, and R.R. Nelson (eds.), The Oxford Handbook of Innovation. Oxford University Press.
Fernandez-Stark, K., Bamber, P., & Gereffi, G. (2011). The offshore services value chain: Upgrading trajectories in developing countries. International Journal of Technological Learning, Innovation and Development, 4(1–3), 206–234.
Geodecki, T. (2020). The development of European business services value chains: The perspective of emerging economies. In Outsourcing in European Emerging Economies (pp. 66–84). Routledge.
Geodecki, T., & Głowacki, J. (2020). The importance of new technologies for business development: Automation and robotisation in the services industry. In Outsourcing in European Emerging Economies (pp. 38–51). Routledge.
Geodecki, T., & Grodzicki, M. J. (2015). Jak awansować w światowej lidze gospodarczej? Kraje Europy Środkowo-Wschodniej w globalnych łańcuchach wartości. Public Governance/Zarządzanie Publiczne, 33 (3), 16–40. https://doi.org/10.15678/ZP.2015.33.3.02
Gereffi, G., Humphrey, J., & Sturgeon, T. (2005). The governance of global value chains. Review of International Political Economy, 12(1), 78–104. https://doi.org/10.1080/09692290500049805
Grodzicki, M. (2018). Konwergencja w warunkach integracji gospodarczej: Grupa Wyszehradzka w globalnych łańcuchach wartości. Kraków: Wydawnictwo Uniwersytetu Jagiellońskiego.
Grodzicki, M. J., & Geodecki, T. (2016). New dimensions of core-periphery relations in an economically integrated Europe: The role of global value chains. Eastern European Economics, 54(5), 377–404.
Górecki, J. (2020). Krakow vs. Other Polish destinations of outsourcing, offshoring, and the global business services sector. In Outsourcing in European Emerging Economies (pp. 129–141). Routledge.
Hardy, J. (1998). Cathedrals in the Desert? Transnationals, Corporate Strategy and Locality in Wroc^ aw. Regional Studies, 32(7), 639–652.
Hardy, J., Micek, G., & Capik, P. (2011). Upgrading local economies in Central and Eastern Europe? The role of business service foreign direct investment in the knowledge economy. Taylor & Francis
Hess, M. (2004). ‘Spatial’relationships? Towards a reconceptualization of embedded ness. Progress in Human Geography, 28(2), 165–186.
Jones, R. W., & Kierzkowski, H. (1990). The Role of Services in Production and International Trade: A Theoretical Framework. The Political Economy of International Trade: Festschrift in Honor of Robert Baldwin, R.. Jones and A. Krueger, Eds., Oxford: Basil Blackwell.
Kaldor, N. (1978). The effect of devaluation on trade in manufacturers. Future Essays in Applied Economics, 99–116.
Krpec, O., & Hodulák, V. (2019). The Czech economy as an integrated periphery: The case of dependency on Germany. Journal of Post Keynesian Economics, 42(1), 59–89.
Markusen, J. R. (2005). Modeling the offshoring of white-collar services: From comparative advantage to the new theories of trade and FDI. National Bureau of Economic Research Cambridge, Mass., USA.
Micek, G., Działek, J., & Górecki, J. (2010). Centra usług w Krakowie i ich relacje z otoczeniem lokalnym. Wyd. Uniwersytetu Jagiellońskiego.
Milberg, W., & Winkler, D. (2013). Outsourcing economics: Global value chains in capitalist development. Cambridge University Press.
Miles, I., Belousova, V., & Chichkanov, N. (2018). Knowledge intensive business services: Ambiguities and continuities. Foresight.
Morrar, R. (2014). Innovation in services: A literature review. Technology Innovation Management Review, 4(4).
Münich, D. Srholec, M., Moritz, M., Schäffler, J. (2014). Mothers and Daughters: Heterogeneity of German Direct Investments in the Czech Republic. Prague Economic Papers, 1, 42–62.
Nölke, A., & Vliegenthart, A. (2009). Enlarging the varieties of capitalism: The emergence of dependent market economies in East Central Europe. World Politics, 61(4), 670–702.
OECD (2013). Interconnected economies: Benefiting from global value chains. OECD Publishing.
Pietrobelli, C., & Rabellotti, R. (2011). Global value chains meet innovation systems: Are there learning opportunities for developing countries? World Development, 39(7), 1261–1269.
Radło, M.-J. (2016). Offshoring, Outsourcing and Production Fragmentation: Linking Macroeconomic and Micro-/Business Perspectives. Springer.
Schumpeter, J. A. (1983). The theory of economic development. Transaction Publishers.
Sirilli, G., & Evangelista, R. (1998). Technological innovation in services and manufacturing: Results from Italian surveys. Research Policy, 27(9), 881–899.
Stehrer, R., & Wörz, J. (2001). Technological Convergence and Trade Patterns’, The Vienna Institute for International Economic Studies (WIIW). WIIW Working Papers.
Stephan, J. (2013). The technological role of inward foreign direct investment in Central East Europe. Springer.
Timmer, M. P., Dietzenbacher, E., Los, B., Stehrer, R., & De Vries, G. J. (2015). An illustrated user guide to the world input–output database: The case of global automotive production. Review of International Economics, 23(3), 575–605.
Timmer, M. P., Los, B., Stehrer, R., & De Vries, G. J. (2013). Fragmentation, incomes and jobs: An analysis of European competitiveness. Economic Policy, 28(76), 613–661.
Wallerstein, I. (1974). The Modern World-System I Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century, With a New Prologue.
Wallerstein, I. (2004). World-systems analysis. Duke University Press.
Wirtz, J., Tuzovic, S., & Ehret, M. (2015). Global business services: Increasing specialization and integration of the world economy as drivers of economic growth. Journal of Service Management.
Wright, R. (2010). Competitiveness and changing patterns of embeddedness in Romania. Competitiveness Review: An International Business Journal.
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Published
2021-12-28
How to Cite
Geodecki, T. (2021). The Dimensions of Territorial Embeddedness of the Business Services Sector in Central and Eastern Europe. Journal of Public Governance, 56(2), 15–31. https://doi.org/10.15678/ZP.2021.56.2.02
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Open Access, licence: CC-BY 4.0
