Executive Summary:
The movement of business activity from developed economies to developing economies—commonly called offshoring—has become the focus of heated debates. Behind these debates lies a pivotal question of scale: How much business activity and how many jobs are at stake? Official statistics are nearly silent, and private-sector researchers vary widely in their estimates of the number of U.S. jobs that have moved offshore, will move offshore, or could move offshore. In an effort to address this gap in prior literature, Princeton economist Alan Blinder released an innovative working paper in 2007 in which he personally reviewed more than 800 occupations in the United States, assessed the "offshorability" of each, and used the evaluations to estimate the total number of U.S. jobs that might be offshorable. Here, HBS research associate Troy Smith and Professor Jan W. Rivkin describe an online exercise that allowed 152 teams of HBS MBA students, collectively, to recreate Blinder's study and to develop insights about the future of offshoring. Key concepts include:
- The surge in the number of potentially offshorable jobs in recent decades suggests that fewer business activities are tied to a specific location. More often, the laws of economics drive the geography of business activity.
- Some of the most creative applications of offshoring have taken jobs, broken them down into component tasks, bundled them in new ways, and relocated each new bundle to the place where its tasks can be completed best or cheapest.
- This opportunity to rethink the fundamental grouping of tasks, not just to adjust the geographic array of historical "job" bundles, gives businesspeople a broad menu of new options for taking advantage of differences across borders.