OUTSOURCING, WEALTH CREATION, AND SMEs: THE INTERNATIONALIZATION OF SERVICES WITHIN THE GLOBAL TEXTILES AND APPAREL INDUSTRY: EASTERN EUROPE AND SOUTH AFRICA – 1989-2004 Sanford L. Moskowitz, Ph.D. Assistant Professor Department of Management Simons Hall – Room 266 Saint John’s University Collegeville, MN 56321 Tel: (320) 363-3523 Email:
[email protected] Jenna E.Gebeke College of Saint Benedict/St. John’s University Collegeville, MN 56321 Email:
[email protected] ABSTRACT This paper examines the global textiles and apparel industry within Eastern Europe and South Africa during the period of rapid globalization (from 1980 to 2003). In doing so, this paper develops two “outsourcing” models by which heretofore low-value-added “blue-collar” small and medium-sized firms (SMEs) capture increasing wealth and expand internationally by evolving into high-value added global service providers. An important way in which developing regions and countries can gain access to Western markets and capital is through their initial role as host countries to Western industry in outsourcing activity. Indeed, recent research shows a strong connection between such outsourcing activity by Western companies in developing countries and the long-term economic growth of these developing “host” countries. This link exists because, from its experience in contracting to more advanced economies, over time, the host country gains knowledge, technology, business skills, and, most importantly, international contacts, especially within the global service network. This internationalization process, in turn, creates wealth in the developing country because, as they internationalize in this way, the SMEs in the developing country evolve from undertaking low value added “blue-collar” manufacturing to higher value added “white-collar” global services that reside further up the value chain of the industries within which the SMEs operate.