1.Off-shoringOff-shoring describes the relocation by a company of a business process from one country to another - typically an operational process, such as manufacturing, or a supporting process, such as accounting. (Robert D. Atkinson, May 2004, Understanding the off-shoring challengeP1)Off shoring can be seen in the context of either production off shoring or services off shoring. After its accession to the World Trade Organization (WTO) in 2001, the People's Republic of China emerged as a prominent destination for production off shoring. After technical progress in telecommunications improved the possibilities of trade in services, India became a country leading in this domain though many parts of the world are now emerging as offshore destinations.
The economic logic is to reduce costs. If some people can use some of their skills more cheaply than others, those people have the comparative advantage. The idea is that countries should freely trade the items that cost the least for them to produce.
a.Production off-shoringProduction off shoring of established products involves relocation of physical manufacturing processes to a lower-cost destination. Examples of production off shoring include the manufacture of electronic components in Taiwan, production of apparel, toys, and consumer goods in China, Vietnam etc.
Product design, research and the development process that leads to new products, are relatively difficult to offshore. This is because research and development to improve products and create new reference designs requires a skill set that is harder to obtain in regions with cheap labor. For this reason, in many cases only the manufacturing will be off shored by a company wishing to reduce costs.
However, there is a relationship between off shoring and patent system strength. This is because companies under a strong patent system are not afraid to offshore work because their work will remain their property. Conversely,