The Industrial Performance Center

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Why we are here and why the analytical problem is
becoming more difficult the evolution of global
industries and the rise of GVCs

• Phase I (1960s) vertically integrated national
  firms and industries
• Phase II (1970s) global dispersion through
  offshoring by MNCs
• Phase III (1980s ) geographic and
  organizational fragmentation outsourcing and
  offshoring
• Phase IV (1990s) A new consolidation, global
  suppliers, the rise of China
• Phase V (2000) Services offshoring, distributed
  RD and design, global knowledge and innovation
  networks, the rise of India

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Key questions raised by global value chains

• What business functions are establishments doing
  internally and externally (outsourcing)?
• What business functions are establishments doing
  domestically and abroad (offshoring)?
• What types of jobs go with various business
  functions, including employment by occupation,
  wages, tenure, and number and type of new hires?
• What educational and training requirements are
  associated with various business functions?
• How do the business functions that an
  establishment engages in relate to the goods and
  services bought and sold (inputs and outputs)?
• How do the business functions that an
  establishment engages in relate to its economic
  performance (market share, profitability,
  employment, share of value added, market share)
• How do the mix of business functions in
  establishments compare across countries?

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There is a need to collect firm- or business
line-level economic data according to a set of
generic business functions

• Generic definitions to allow comparison and
  aggregation across industries and places
• Functional classifications (neither occupation
  nor industry) reflect the tools used by managers
  and yield collectable data
• Comprehensive definitions include both strategic
  and mundane functions
• Ownership of business function sources measures
  outsourcing
• Location of business function sources measures
  offshoring
• Employment by business function reveals
  organizational design

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Current efforts to collect original business
function data

• USA, Bureau of Labor Statistics Mass Layoff
  Statistics Program (BLS MLS)
• Ongoing national data collection For the first
  two quarters of 2007 BLS reported on 2,135 layoff
  events where Business Functions were identified,
  involving 464,765 workers.
• European Union, Questionnaire on International
  Sourcing (EU Survey)
• Administered in 14 out of 27 EU member states
  with 60,000 responses so far.
• Canada, Survey of Changing Business Practices in
  the Global Economy (Stats Canada)
• Undergoing pilot testing at Canadian MNEs, survey
  jointly developed by the Canadian Department of
  Foreign Affairs and International Trade (DFAIT),
  in partnership with Statistics Canada and
  Industry Canada
• USA, National Organizational Survey (NOS)
• Under development for 2009 with sample frame
  derived from survey of 3,000 individuals in 2008
  General Social Survey (module on globalization,
  technological change, and economic insecurity).
• International Offshoring Research Network (ORN)
• Survey of 253 US companies reporting 880
  offshoring implementations initiated between 2000
  and 2006. Data collected by business function.
  14 response rate.

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Core Business Functions, Definitions
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Support Business Functions, Definitions
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Core vs. support functions
Core functions (the value chain)
Corporate governance Human resources Technology
process development Firm infrastructure and
IT Customer and after-sales service
Support business functions
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Using Business Functions to Reveal Organizational
Design (hypothetical example)
SoftTest Inc. Newark, NJ
Affiliated supplier Independent supplier
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Internal, External, and International Sourcing of
Business Functions by Danish Firms, 2002-2006
Notes n3,170 Danish enterprises with more than
50 employees. Rows may not add to 100 because a
few firms reported more than one source for a
given business function. Source Eurostat
International Sourcing Survey, courtesy of
Statistics Denmark (Nielsen, 2008).
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Hypothetical employment and wage data according
to business function for three types of firms
(note business function categories unrevised )
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Hypothetical employment according to business
function for three types of firms
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The vision roll out business function metrics
internationally Hypothetical business function
employment shares for Canada and China
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Comparison of current business function frameworks
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Comparison of current business function frameworks
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Comparison of current business function frameworks
Distribution of offshore implementations across
functions and locations
Source Lewin, Massini, and Peters, 2008, Why
Are Companies Offshoring Innovation? Journal of
international Business Studies
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Survey format for outsourcing and offshoring of
business functions (inputs)
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Survey format for geography of sales (outputs)
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Survey format for (occupational) employment and
wage data by business functions
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Survey format for GVC governance
characteristics(Statistics Canada)
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Survey format for GVC transaction
characteristics (Statistics Canada)
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Survey questions about the offshorability of work
(NOS)

• How often do you meet face to face with
  customers, clients, patients, or others to whom
  you provide products or services?
• How often do you meet face-to-face with
  co-workers to work on projects, for example
  solving special problems or improving products or
  services
• How often do you exchange information with
  co-workers located outside the United States?
• What proportion of your workforce uses a computer
  or computerized equipment at work?
• Could your workers (who use computers) do their
  jobs without a computer or computerized
  equipment?

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Do we need an international working group for the
harmonization of business function-based GVC data
collection?

• Business function definitions
• Balance between comprehensiveness vs.
  collectibility
• Hierarchical definitions, OK, but lets keep it
  simple
• Job-level descriptive criteria
• Skills, training, wages, age, gender, occupations
  (available from other surveys)
• Offshorability
• Firm-level descriptive criteria
• Firm characteristics turnover, industry, value
  chain role(s)
• Mapping the chain location of affiliates, main
  suppliers, geography of employment and sales
• Business functions quantitative measures
• (Occupational) employment by business function
• Number of outsourced and offshored
  implementations by business function
• Location by business function
• Business functions qualitative measures
• Ownership of input sources (affiliates or
  suppliers)
• Motivations for outsourcing and offshoring
• Value chain governance characteristics