New Horizons in Regional Science series
Edited by Charlie Karlsson, Börje Johansson, Kiyoshi Kobayashi and Roger R. Stough
Chapter 7: Business service location with spatially stochastic demands: agglomeration economies generated by interaction costs and localized uncertain demand – an optimal stock location model approach
In many developed countries throughout the world, growth of the labor share of the tertiary industries has been marked, reflecting the trend of industrialization of services and soft work. Corresponding to this industrialization trend, many firms have considered outsourcing of soft tasks or service tasks. Outsourcing is a rational strategy because of specialty and scale economies. The first, specialty, means that the outsourced workers can be more concentrated on specialized work than in-house workers, who must engage in several types of work in their career in the firm. They can obtain deeper experience and more specialized knowledge than in-house generalists. The second point, scale economies, becomes apparent in a shorter time range. Outsourced workers can obtain more work from outside of the firm. Development of ICT has made it easy for firms and governmental agencies to exchange information and knowledge with outsourced workers, thereby underpinning the remarkable development of information-related business service firms.
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