A Foundation-supported June 2003 Brookings workshop focused on data improvements needed to assess better the size and effects of the offshoring of services, i.e., the procurement abroad of business processes, whether via foreign subsidiaries of a multinational firm or through arms-length contracts with other firms. Attendance was heavily oversubscribed, and presentations so rich and challenging that Brookings intends to devote its annual two-day Brookings Trade Forum to a more in-depth discussion of the offshoring of services. This grant supports the planned Forum. Substantial papers by leading experts will be commissioned, participants drawn from academia, government, international institutions and the private sector will attend, and results will be published as a formal Brookings volume. The agenda includes contributions from three Sloan-supported researchers who have conducted in-depth studies of specific industries for which offshoring has become a significant issue: software services, semiconductors, and call center operations. Also on the proposed agenda are sessions on current and prospective impacts of offshoring on U.S. labor markets, especially those in high-tech fields, and on alternative taxation or adjustment policies that might address such workforce effects. Project Directors: Susan Collins and Lael Brainard, Senior Fellows.

As part of a past Sloan-supported project, Frank Levy, a labor economist at MIT, studied the computerization of work. As the project progressed, Levy became increasingly interested in the offshoring and outsourcing of jobs, since he observed that much of the work that was being outsourced to lower-wage workers in distant locations was often the same work that most easily lent itself to computer substitution. These two alternatives, computer substitution and offshoring, are choices that often overlap. For example, call center jobs are lost both to continuous speech recognition software and to offshore facilities where operators read scripts from screens. However, computerization and offshoring have very different implications for the U.S. economy, and the choices being made of one versus the other have important effects. This new grant supports a research project in which the effects of offshoring and computer substitution will be studied in the high-skill occupation of diagnostic radiologist. Radiologists will be interviewed and observed in practice and training. Case studies will be developed of individuals who work in radiology, including radiologists, software developers, and others, documenting the changing nature of their work over time. The project should shed light on the potential for computer substitution and offshoring to affect demand for U.S. diagnostic radiologists and hopefully, produce insights on similar impacts on other mid- and high-skill jobs. Project Director: Professor Frank Levy, Department of Urban Studies and Planning.

This grant supports a project to study the semiconductor industry and the decisions that some 6-10 firms selected from the industry are making to locate their R&D outside the U.S. The research aims to uncover what new strategies or approaches companies are following to organize their R&D efforts. Researchers will analyze the implications of these changes for the U.S. and suggest national policies that might affect the outcomes as they impact U.S. companies. Global manufacturing networks are today well-established in high technology industries, including semiconductors. There are growing signs of increased movement of R&D functions offshore as well. This trend could have important implications for industrial innovation, the economic competitiveness of U.S. firms, and the nature of jobs available for U.S. workers. The study should shed light on this important trend. Project Director: Henry W. Chesbrough, Executive Director, Center for Technology Strategy and Management, Haas School of Business.

Support for adding the study of the software industry to the Sloan Globalization Network Project. Project Director: Ashish Arora, Professor of Economics and Public Policy, The Heinz School.

For study of human resources issues in outsourcing/offshoring of financial services. Project Director: Hitendra Wadhwa, Assistant Professor of Marketing, Columbia Business School.

Partial support for study of offshore programmer retention. Project Director: Kate M. Kaiser, Associate Professor of Management, College of Business Management.

To establish a working group to examine the definitional and measurement issues that hamper research on offshoring, and to make recommendations for improvement. Project Director: Professor Frank Levy, Department of Urban Studies and Planning.

Support for adding the study of business process outsourcing in the electronic industry to the Sloan Globalization Network Project. Project Director: Professor Henry S. Rowen, Asia-Pacific Research Center.