INTERNATIONAL OFFSHORE INVESTMENT

International Offshore Investment

International Offshore Investment

Introduction

One of the consequences of globalization is that firms now compete with domestic and foreign players in meeting customer price and quality expectations. To do so, firms are increasingly using business strategies known as “offshore investments”. According to Huws and Dahlmann, the definition of offshore investment brings together two concepts, “geographical and legal”. Offshoring is the geographical dimension which refers to the relocation of any part of a firm's value chain beyond national borders. In its legal sense, outsourcing refers to a business activity (production of goods or services) purchased from an external source rather than internally. The legal dimension of this relationship is subcontracting. Paul and Wooster (2010) drawing on the extensive and long-standing literature on the internalization of production (pioneered by Dunning, 2001) in the form of the ownership-location-internalization paradigm suggest that outsourcing deals with the “externalization” of production processes and in this regard outsourcing can be viewed as the mirror image of the decision to “internalize” processes in the firm. From a theoretical perspective, the transaction costs of the externalization versus internalization processes in the firm will be driving the decision whether the firm should “make or buy”.

About India

Overall GDP of India has been growing at a much faster rate after liberalization and especially during the past decade. Due to the earlier efforts of industrialization and the recent fast growth spurred by services sector, position of agriculture in the overall economy in terms of GDP has been fallen down steadily and is now less than one-fifth of the overall national GDP. Let us remind ourselves that this is the sectors on which close to 65% of Indian people depend for their livelihood. It is unlikely that it can grow to 30 or 40% as it was before. It will continue to hover around 20% of GDP even when agricultural sector shows a robust growth. The reason is because we discuss here about the ratio in the overall pie. When agriculture growth is well, other sectors also grow well because the 65% of people get better income thus increasing the size of domestic market! Table - 1 indicates how the macroeconomic pie of India has been divided and has changed over a decade.

The details are self-evident indicating new growth areas. But it also indicates that sectoral changes do not occur too fast. The primary agriculture, mining etc., have by and large given way to trade, hotels, transport and communications. Internal wealth (some of them even the earlier black money turning to grey and white) drive the services sector and modern transport and communications. These two modernizing sectors can help agriculture, etc., (primary) sector to become more value adding and grow, thus raising the incomes of millions of poor households. In the emerging Indian scenario, there is a large scope of business, technological (and therefore project management) innovations.

Having said the above, readers, listeners can draw several other conclusions. But actual clues for actions can come about only when one ...