Brazil has expressed an intention to compete with India in offshoring. This paper examines the outsourcing industry in Brazil. First, we analyze how Brazil's well-developed domestic IT market, its manufacturing prowess and export orientation have generated interorganizational as well as intraorganizational externalities or spillovers for the offshoring sector. Such externalities take various forms such as knowledge spillovers, learning curves, brand loyalty, availability of tools and resources, knowledge about quality and value perceptions of consumers as well as production externalities. The entry of foreign IT firms in Brazil has also generated externalities in the forms of indirect economic impacts on local organizations. Second, we investigate how factors related to offshoring skills, cultural compatibility and physical proximity to major markets are related to closeness to the needs of clients in terms of experience, expertise, culture and geographic reach. Finally, as making a contract complete represents a high degree of complexity and costs for parties involved in an offshoring agreement; we explore the importance of regulation and regulatory institutions.
