The Dimensions of Territorial Embeddedness of the Business Services Sector in Central and Eastern Europe

• Authors: Geodecki Tomasz
• Languages of publication: EN

Abstracts

EN

The business services sector (BSS) is gaining an increasingly important position in the employment structure of Central and Eastern European (CEE) cities. With the emergence of global value chains, the demand for externally provided shared services for subsidiaries spread across the world, including accounting and IT services has grown. In recent decades, leading companies have recognised that thanks to remote communication, some services can be provided in places where labour costs are significantly lower. Even before the 2004 enlargement of the European Union, multinational corporations began to move the labour-intensive links of their value chains to the CEE countries. In the debate about the future of the BSS in these low-cost economies two challenges have been identified. The first one is the threat of relocation. The other one is associated with weaker linkages between service companies and local customers/suppliers than in Western Europe. These two challenges can be addressed by tackling the third one, namely increasing process efficiency. In consequence, even an increased share of foreign contractors does not have to reduce the scale of cooperation with local entities. The aim of this paper is first to propose a range of measures of territorial embeddedness to describe the phenomenon in question and the above-mentioned challenges, and second, to use these measures to determine the level and dynamics of embeddedness of the BSS in CEE economies. In the empirical part of the paper, changes in these three areas that make up territorial embeddedness are explored in depth. Eight divisions covering the BSS in CEE-11 countries were compared with their Western European counterparts at two points in time: in 2000 and 2014. The study relies on basic statistical data and calculations using input-output tables. It was found that due to productivity growth, the cost competitiveness of the BSS in the 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 increased. The rapidly improving skills of employees in the Central European BSS as well as the growing importance of knowledge-intensive services in the structure of value added may further contribute to the importance of CEE as a location for business services in Europe.

Keywords

EN

business services; territorial embeddedness; global value chains; wages; labour productivity; skills

• Publisher: Uniwersytet Ekonomiczny w Krakowie, Małopolska Szkoła Administracji Publicznej
• Journal: Zarządzanie Publiczne / Public Governance
• Year: 2021
• Issue: 2(56)
• Pages: 15-31

Contributors

author

Geodecki Tomasz

• Cracow University of Economics, Department of Public Policies

References

• Amsden, A. H. (2001). The rise of" the rest": Challenges to the west from late-industrializing economies. Oxford University Press, USA.
• 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.

Identifiers

DOI

https://doi.org/10.15678/ZP.2021.56.2.02