Investigating the emergence of software development centres in Central and Eastern Europe

Micek, Grzegorz

doi:0016-7282

Skip to main menu
Skip to search engine
Skip to content
Skip to footer

Download

Title: Investigating the emergence of software development centres in Central and Eastern Europe

Abstract:

The emergence of foreign software development centres (SDCs) in Central and Eastern Europe has led to some debate over the reasons and consequences of location decisions. This paper analyses those factors that influence location and also the consequences of foreign direct investment in software development centres in Bulgaria, Estonia and Poland. Foreign companies are compared and contrasted with the indigenous SDCs which are subcontractors for foreign companies or export to foreign markets. This paper questions the degree to which cost-related considerations influence location decisions, contrasting their significance with ‘return migration’ and the search for highly qualified graduates. To ward off growing wage pressure, SDCs provide more value-added services. Foreign SDCs move up the value chain, acquiring new competences. It may be argued that an increasing shift can be observed from a dependent mode based on a dependency on a foreign headquarters to a developmental type characterised by growing freedom. The local embededdness of foreign SDCs in the analysed countries is usually limited. However, ‘backshoring’ will not occur in the near future due to their high quality of work and improved efficiency.

References:

1. Ali-Yrkkö, J., and Jain, M. (2005), Offshoring Software Development – Case of Indian Firms in Finland. Keskusteluaiheita – Discussion papers, Helsinki, The Research Institute of the Finnish Economy, 971.
2. Arora, A., Arunchalam, V.S., Asundi, J. and Fernandes, R. (2001), The Indian Software Services Industry, Research Policy, 30, 1267–1287.
http://dx.doi.org/10.1016/S0048-7333(00)00148-7 -
3. Arora, A. and Athreye, S. (2002), The Software Industry and India's Economic Development, Information Economics and Policy 14(2): 253–273.
http://dx.doi.org/10.1016/S0167-6245(01)00069-5 -
4. Carmel, E., and Agawar, R. (2000), Offshore Sourcing of Information Technology Work by America's Largest Firms. Technical Report, Washington D.C: Kogod School, American University.
5. Coe, N.M. (1997a), Internalisation, Diversification and Spatial Restructuring in Transnational Computer Service Firms: Case Studies from the UK Market. Geoforum, 28, 253–270.
http://dx.doi.org/10.1016/S0016-7185(97)00012-2 -
6. Coe, N.M. (1997b), US Transnationals and the Irish Software Industry: Assessing the Nature, Quality and Stability of a New Wave of Foreign Direct Investment. European Urban and Regional Studies, 4: 211–230.
http://dx.doi.org/10.1177/096977649700400302 -
7. Coe, N.M. (1999), Emulating the Celtic Tiger? A Comparison of the Software Industries of Singapore and Ireland, Sinagpore Journal of Tropical Geography, 20(1): 36–65.
http://dx.doi.org/10.1111/1467-9493.00042 -
8. Commander, S. (2004), Brains: What Can They do for Development?, Lecture at the London Business School and EBRD, London, 4 March 2004, Sussex Development Lecture.
9. Correa, C.M., (1996), Strategies for Software Exports from Developing Countries, World Development, 24(1): 171–182.
http://dx.doi.org/10.1016/0305-750X(95)00123-T -
10. Crone, M. (2002), The Irish Indigenous Software Industry: Explaining the Development of a Knowledge-Intensive Industry Cluster in a Less Favoured Region, paper presented at 42nd European RSA Conference, 27-31 Aug.2002, Dortmund, available from <http://www.ersa.org>, accessed 18 Jan. 2006.
11. Crone, M. (2003), Clustering and Cluster Development in Knowledge-Intensive Industries: A 'Knowledge and Learning' Perspective on New Firm Formation and Firm-Building/Firm Growth in Ireland's Indigenous Software Industry, St Andrews, 20-22 Aug. 2003, Regional Science Association International: British and Irish Section, 33rd Annual Conference.
12. Davison, D. (2004), Top 10 Risks of Offshore Outsourcing, Meta Group, available from <http://techupdate.zdnet.com/techupdate/stories/main/>.
13. D'Costa, A.P. (2003), Uneven and Combined Development: Understanding India's Software Exports, World Development, 31(1): 211–226.
http://dx.doi.org/10.1016/S0305-750X(02)00182-1 -
14. Dossani R. and Kenney M. (2007), The Next Wave of Globalisation: Relocating Services Provision to India, World Development, 35(5): 772–791.
http://dx.doi.org/10.1016/j.worlddev.2006.09.014 -
15. Gentle, C. and Howells, J. (1994), The Computer Services Industry: Restructuring for a Single Market, Tijdschrift voor Economische en Sociale Geographie, 85(4): 311–321.
http://dx.doi.org/10.1111/j.1467-9663.1994.tb01342.x -
16. Girma, S., and Görg, H. (2002), Outsourcing, Foreign Ownership and Productivity: Evidence from UK Establishment Level Data. The University of Nottingham, Research Papers, 16.
17. Guzik, R., Micek, G. (2008), Impact of Delocalisation on the European Software Industry, in Labrianidis L. (ed.), The Moving Frontier: The Changing Geography of Production in Labour Intensive Industries, Ashgate, 229–254.
18. Heeks, R., (1996), India's Software Industry: State Policy, Liberalisation and Industrial Development, New Delhi, Sage Publications.
19. Hietala, J., Jokinen, J.-P., Bauer, L., Maula, M., Leino, V., Kontio, J. and Autio, E. (2003), Finnish Software Product, Economic Trends, 5.
20. Huws, U., Jagger, N., and O'Regan, S. (1999), Teleworking and Globalisation, IES Report, 358.
21. Lai, E., Riezman, R., and Wang, P. (2004), 9-11 Sep 2004, Outsourcing of Innovation. Nottingham, ETSG 2004 seminar
22. Larosse, J., Slaets, P., Wauters, J., Bruninx, S., Simkens, P. and Wintjes, J. (2001), ICT Clusters Organisation in Flanders: Co-operation in Innovation in the New Networked Economy, in Innovative Clusters. Drivers of National Innovation Systems, Paris, OECD, 112–131.
23. Malecki, E.J. and Moriset B. (2008), The Digital Economy. Business Organization, Production Processes and Regional Developments, London- New York, Routledge.
24. Micek, G. (2006), Czynniki i mechanizmy koncentracji przestrzennej firm informatycznych w Polsce [Factors and mechanisms of geographical concentration of IT industry in Poland], Unpublished Ph.D. thesis, Krakow, Institute of Geography and Spatial Management, Jagiellonian University.
25. Micek, G. (2008), Exploring the Role of Sticky Places in Attracting the Software Industry to Poland, Geographia Polonica, 81(2): 42–60.
26. Micek, G., Działek J. and Górecki J. (2010), Centra usług i ich relacje z otoczeniem lokalnym [Service centres and their relations with local environment], Kraków, Wydawnictwo UJ.
27. Overby, S. (2003), The Hidden Costs of Offshore Outsourcing, 1 Sept.2003, CIO Magazine.
28. Saxenian, A.L. (2002), Silicon Valley's New Immigrant High-Growth Entrepreneurs, Economic Development Quarterly, 16(1): 20–31.
http://dx.doi.org/10.1177/0891242402016001003 -
29. Saxenian, A.L (2006), The New Argonauts: Regional Advantage in a Global Economy, Cambridge, MA, Harvard University Press.
30. Schware, R., (1987), Software Industry Development in the Third World, World Development, 15: 1249-1267.
http://dx.doi.org/10.1016/0305-750X(87)90122-7 -
31. Turok, I., (1994), Inward Investments and Local Linkages: How Deeply Embedded is 'Silicon Glen'? Regional Studies, 27(5): 401–418.
http://dx.doi.org/10.1080/00343409312331347655 -
32. Trends in the offshoring of IT jobs (2004), Ottawa: Prism Economics and Analysis, Software Human Resource Council.
33. International Trade: US and India data on offshoring show significant difference (2005), US Government Accountability Office, October, report, #GAO-06-116.
34. Young, S., Hood, N. and Dunlop, S. (1988), Global Strategies, Multinational Subsidiary Roles and Economic Impact in Scotland, Regional Studies, 22(6): 487–497.
http://dx.doi.org/10.1080/00343408812331345160 -
35. Young, S., Hood, N. and Dunlop, S. (1994), Multinational Enterprises and Regional Economic Development; Regional Studies, 28(7): 657–678.
http://dx.doi.org/10.1080/00343409412331348566 -