Geography of Transnational Production Networks
I believe that Tata Consultancy Services (TCS) is a good example of a transnational corporation with capabilities of worldwide learning, economies of scale and flexibility. TCS have managed to fulfill the objectives of the workplace pension scheme in the U.K. The Engagement of TCS throughout the whole process shows how TCS puts business process outscoring into practice. Thereby, through investigation of this case, I attempt to form an understanding of which strategy TCS has in order to expand into the U.K.’s software industry. Further, I try to find out what is the subsequent technological impact on the home country, India. The paper is structured in the following approach. The first part of the paper forms a conceptual framework. To begin with, I explain the role of TNCs in the global service industry and the technological impacts and risks in general. Further a brief description of TCS and Finally, this part includes also a theoretical frame that defines the business network internationalization process. The second part of the paper introduces an overview of UK’s service sector and the TCS’s involvement in this country as a short introduction to the case. In addition to that, the engagement between TCS and NEST is demonstrated in the case. This case is subsequently analyzed and later discussed in relation to the theory.
The service Industry and the technological impact
The service industries contribute to roughly 50 % and 70 % of GDP in developing and developed countries respectively. Indeed, Services are the most important inputs in products which increase their importance in most markets. The development of ICT-technologies have alleviated the trade of services and lowered the need for providers and users to be co-located. Further, these advances have led to digitized information and transformation at lower cost. With this contribution, services could be divided into components and be sent to selected location separately. (Ivarsson 2013) FDI in services have different impacts on the home country. The most important impact of services FDI to development is the transfer of soft technology especially in informationintensive industry. During the period 1989-2000, foreign affiliates of TNCs in developing
countries became much more skill-intensive compared to foreign affiliates manufacturing TNCs. The World investment report 2004 stated that: “compensation in service affiliates in developing countries was much closer to that of affiliates in developed countries (63%), while the comparable figure in manufacturing was lower (31% in 2000)”. This is mostly due to the technology transfer. Further, there is a greater employment of local players in high-skill jobs in services because the traditional trend of splitting the value chain and moving lees-skilled is more complicated than in manufacturing. Thus, some information-intensive services TNCs divide strategic functions (e.g. know how, managerial expertise) to an increasing extend for positioning in foreign affiliates. Thereby, training and experiencing enable local employees to acquire new skills of foreign affiliates which increase the dissemination risk if they move to a local competitor. However, the potential of technology and skills depends on internal and external reasons such as TNCs training policies and their willingness to be adopted and gain trust, level of competition, quality of education and training in the host country and equally important Linkages between foreign affiliates and domestic actors. (WIR 2004)
However, in some cases, the non-equity mode could be the common option in the service industry. The...