The outsourcing and offshoring of services to developing countries has created new opportunities for economic development for countries in the global South. This paper looks at the scope for agency of local institutional actors in the investment attraction of business process outsourcing companies. Drawing on empirical work from the Philippines, an analysis of the process of integrating lower‐tier cities into global service production networks is presented. Specifically, the roles of local institutional actors in facilitating FDI attraction and strategically coupling local assets with the needs of multinational service corporations are discussed. Two contrasting cases, the cities of Baguio and Bacolod, show that considerable scope for intervention rests with local institutional actors. The findings have implications for policymaking and research concerned with the newest phase of outsourcing and offshoring in developing countries.