IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v169y2015icp141-155.html
   My bibliography  Save this article

Prior to reshoring: A duration analysis of foreign manufacturing ventures

Author

Listed:
  • Ancarani, Alessandro
  • Di Mauro, Carmela
  • Fratocchi, Luciano
  • Orzes, Guido
  • Sartor, Marco

Abstract

This paper throws light on the determinants of the duration of manufacturing offshore experiences by US and European firms prior to reshoring. By applying survival analysis to a dataset of 249 offshoring experiences terminated with a relocation to the home country/region, we estimate the effects of different groups of survival determinants. Results highlight that contextual factors such as the industry, the home country, the host country, and the size of the firm significantly affect the duration of offshoring experiences. The likelihood of termination is in fact higher for the electronics and automotive industries, for small firms, for firms headquartered in Europe, and for offshoring to Asia. The analysis of the motivations for reshoring shows that quality issues experienced offshore emerge as the key factor giving rise to shorter offshore stays. Based on these empirical findings, a set of testable propositions is developed. In particular, we conjecture that the likelihood of termination of offshore manufacturing and the return to the home country may be accelerated by technology-based industries, small firm sizes, shrinking cost differentials and the psychic distance between home and host country, the organizational archetypes, and quality related motivations.

Suggested Citation

  • Ancarani, Alessandro & Di Mauro, Carmela & Fratocchi, Luciano & Orzes, Guido & Sartor, Marco, 2015. "Prior to reshoring: A duration analysis of foreign manufacturing ventures," International Journal of Production Economics, Elsevier, vol. 169(C), pages 141-155.
    • Handle: RePEc:eee:proeco:v:169:y:2015:i:c:p:141-155
    DOI: 10.1016/j.ijpe.2015.07.031
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925527315002807
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ijpe.2015.07.031?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Manning, Stephan, 2014. "Mitigate, tolerate or relocate? Offshoring challenges, strategic imperatives and resource constraints," Journal of World Business, Elsevier, vol. 49(4), pages 522-535.
    2. J. Myles Shaver & Fredrick Flyer, 2000. "Agglomeration economies, firm heterogeneity, and foreign direct investment in the United States," Strategic Management Journal, Wiley Blackwell, vol. 21(12), pages 1175-1193, December.
    3. Mata, Jose & Portugal, Pedro & Guimaraes, Paulo, 1995. "The survival of new plants: Start-up conditions and post-entry evolution," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 459-481, December.
    4. Yang, Zhilin & Wang, Xuehua & Su, Chenting, 2006. "A review of research methodologies in international business," International Business Review, Elsevier, vol. 15(6), pages 601-617, December.
    5. Kedia, Ben L. & Mukherjee, Debmalya, 2009. "Understanding offshoring: A research framework based on disintegration, location and externalization advantages," Journal of World Business, Elsevier, vol. 44(3), pages 250-261, July.
    6. Stine Jessen Haakonsson & Peter D. Ørberg Jensen & Susan M. Mudambi, 2013. "A co-evolutionary perspective on the drivers of international sourcing of pharmaceutical R&D to India," Journal of Economic Geography, Oxford University Press, vol. 13(4), pages 677-700, July.
    7. Peter J. Buckley & Mark Casson, 1991. "The Future of the Multinational Enterprise," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-21204-0.
    8. Glaister, Keith W. & Buckley, Peter J., 1998. "Management-performance relationships in UK joint ventures," International Business Review, Elsevier, vol. 7(3), pages 235-257, June.
    9. David Bailey & Lisa De Propris, 2014. "Editor's choice Manufacturing reshoring and its limits: the UK automotive case," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 7(3), pages 379-395.
    10. José Mata & Pedro Portugal, 2000. "Closure and divestiture by foreign entrants: the impact of entry and post‐entry strategies," Strategic Management Journal, Wiley Blackwell, vol. 21(5), pages 549-562, May.
    11. Zhao, Hongxin & Zhu, Gangti, 1998. "Determinants of ownership preference of international joint ventures: new evidence from Chinese manufacturing industries," International Business Review, Elsevier, vol. 7(6), pages 569-589, November.
    12. John H Dunning, 1998. "Location and the Multinational Enterprise: A Neglected Factor?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(1), pages 45-66, March.
    13. Chadee, Doren D. & Qiu, Feng & Rose, Elizabeth L., 2003. "FDI location at the subnational level: a study of EJVs in China," Journal of Business Research, Elsevier, vol. 56(10), pages 835-845, October.
    14. Michel A. Habib & Pierre Mella-Barral, 2007. "The Role of Knowhow Acquisition in the Formation and Duration of Joint Ventures," The Review of Financial Studies, Society for Financial Studies, vol. 20(1), pages 189-233, January.
    15. Juan Alcácer & Wilbur Chung, 2007. "Location Strategies and Knowledge Spillovers," Management Science, INFORMS, vol. 53(5), pages 760-776, May.
    16. Schmenner, Roger W. & Huber, Joel C. & Cook, Randall L., 1987. "Geographic differences and the location of new manufacturing facilities," Journal of Urban Economics, Elsevier, vol. 21(1), pages 83-104, January.
    17. Jan Johanson & Jan-Erik Vahlne, 1977. "The Internationalization Process of the Firm—A Model of Knowledge Development and Increasing Foreign Market Commitments," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 8(1), pages 23-32, March.
    18. Ram Mudambi, 2008. "Location, control and innovation in knowledge-intensive industries," Journal of Economic Geography, Oxford University Press, vol. 8(5), pages 699-725, September.
    19. Maurizio Zollo & Sidney G. Winter, 2002. "Deliberate Learning and the Evolution of Dynamic Capabilities," Organization Science, INFORMS, vol. 13(3), pages 339-351, June.
    20. John Cantwell, 2009. "Location and the multinational enterprise," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(1), pages 35-41, January.
    21. da Silveira, Giovani J.C., 2014. "An empirical analysis of manufacturing competitive factors and offshoring," International Journal of Production Economics, Elsevier, vol. 150(C), pages 163-173.
    22. Witold J. Henisz & Jeffrey T. Macher, 2004. "Firm- and Country-Level Trade-offs and Contingencies in the Evaluation of Foreign Investment: The Semiconductor Industry, 1994–2002," Organization Science, INFORMS, vol. 15(5), pages 537-554, October.
    23. Finbarr Livesey, 2012. "The Need for a New Understanding of Manufacturing and Industrial Policy in Leading Economies," Innovations: Technology, Governance, Globalization, MIT Press, vol. 7(3), pages 193-202, July.
    24. Steffen Kinkel & Gunter Lay & Spomenka Maloca, 2007. "Development, motives and employment effects of manufacturing offshoring of German SMEs," International Journal of Entrepreneurship and Small Business, Inderscience Enterprises Ltd, vol. 4(3), pages 256-276.
    25. Peter J Buckley & Mark C Casson, 2009. "The internalisation theory of the multinational enterprise: A review of the progress of a research agenda after 30 years," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(9), pages 1563-1580, December.
    26. Holweg, Matthias & Reichhart, Andreas & Hong, Eui, 2011. "On risk and cost in global sourcing," International Journal of Production Economics, Elsevier, vol. 131(1), pages 333-341, May.
    27. Wren, Colin & Jones, Jonathan, 2009. "Re-investment and the survival of foreign-owned plants," Regional Science and Urban Economics, Elsevier, vol. 39(2), pages 214-223, March.
    28. Huang, Shihping Kevin, 2014. "The emergence of the outsourcing market and product technological performance," Technological Forecasting and Social Change, Elsevier, vol. 82(C), pages 132-139.
    29. John H Dunning, 2009. "Location and the multinational enterprise: A neglected factor?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(1), pages 5-19, January.
    30. Bert Meijboom & Hans Voordijk, 2003. "International operations and location decisions: a firm level approach," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 94(4), pages 463-476, September.
    31. Rajneesh Narula & John Dunning, 2000. "Industrial Development, Globalization and Multinational Enterprises: New Realities for Developing Countries," Oxford Development Studies, Taylor & Francis Journals, vol. 28(2), pages 141-167.
    32. Jia, Fu & Lamming, Richard & Sartor, Marco & Orzes, Guido & Nassimbeni, Guido, 2014. "Global purchasing strategy and International Purchasing Offices: Evidence from case studies," International Journal of Production Economics, Elsevier, vol. 154(C), pages 284-298.
    33. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(2), pages 190-207.
    34. Graf, Michael & Mudambi, Susan M., 2005. "The outsourcing of IT-enabled business processes: A conceptual model of the location decision," Journal of International Management, Elsevier, vol. 11(2), pages 253-268, June.
    35. Peter J. Buckley, 1989. "Foreign Direct Investment by Small- and Medium-Sized Enterprises: The Theoretical Background," Palgrave Macmillan Books, in: The Multinational Enterprise, chapter 2, pages 24-45, Palgrave Macmillan.
    36. Jean J Boddewyn, 1983. "Foreign and Domestic Divestment and Investment Decisions: Like or Unlike?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 14(3), pages 23-35, September.
    37. Pearce, John A., 2014. "Why domestic outsourcing is leading America's reemergence in global manufacturing," Business Horizons, Elsevier, vol. 57(1), pages 27-36.
    38. Marshall S Jiang & Preet S Aulakh & Yigang Pan, 2009. "Licensing duration in foreign markets: A real options perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(4), pages 559-577, May.
    39. John H Dunning, 1980. "Towards an Eclectic Theory of International Production: Some Empirical Tests," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 11(1), pages 9-31, March.
    40. Tsang, Eric W.K., 2005. "Influences on foreign ownership level and entry mode choice in Vietnam," International Business Review, Elsevier, vol. 14(4), pages 441-463, August.
    41. Dunning, John H., 2000. "The eclectic paradigm as an envelope for economic and business theories of MNE activity," International Business Review, Elsevier, vol. 9(2), pages 163-190, April.
    42. Peter D. Ørberg Jensen & Torben Pedersen, 2011. "The Economic Geography of Offshoring: The Fit between Activities and Local Context," Journal of Management Studies, Wiley Blackwell, vol. 48(2), pages 352-372, March.
    43. Alan Rugman, 1980. "Internalization as a general theory of foreign direct investment: A re-appraisal of the literature," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 116(2), pages 365-379, June.
    44. Audretsch, David B, 1998. "Agglomeration and the Location of Innovative Activity," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 14(2), pages 18-29, Summer.
    45. McCloughan, Patrick & Stone, Ian, 1998. "Life duration of foreign multinational subsidiaries: Evidence from UK northern manufacturing industry 1970-93," International Journal of Industrial Organization, Elsevier, vol. 16(6), pages 719-747, November.
    46. Michael Porter, 1994. "The Role of Location in Competition," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(1), pages 35-40.
    47. Mark Casson & Nigel Wadeson, 2013. "The Economic Theory of International Supply Chains: A Systems View," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 20(2), pages 163-186, July.
    48. Mazzola, Erica & Perrone, Giovanni, 2013. "A strategic needs perspective on operations outsourcing and other inter-firm relationships," International Journal of Production Economics, Elsevier, vol. 144(1), pages 256-267.
    49. Nordman, Emilia Rovira & Tolstoy, Daniel, 2014. "Does relationship psychic distance matter for the learning processes of internationalizing SMEs?," International Business Review, Elsevier, vol. 23(1), pages 30-37.
    50. Jane W. Lu & Paul W. Beamish, 2001. "The internationalization and performance of SMEs," Strategic Management Journal, Wiley Blackwell, vol. 22(6‐7), pages 565-586, June.
    51. Ram Mudambi & Markus Venzin, 2010. "The Strategic Nexus of Offshoring and Outsourcing Decisions," Journal of Management Studies, Wiley Blackwell, vol. 47(8), pages 1510-1533, December.
    52. Xiaole Wu & Fuqiang Zhang, 2014. "Home or Overseas? An Analysis of Sourcing Strategies Under Competition," Management Science, INFORMS, vol. 60(5), pages 1223-1240, May.
    53. Sidney G. Winter, 2003. "Understanding dynamic capabilities," Strategic Management Journal, Wiley Blackwell, vol. 24(10), pages 991-995, October.
    54. Jiang, Marshall S. & Chu, Rongwei & Pan, Yigang, 2011. "Anticipated duration of international joint ventures: A transaction cost perspective," Journal of International Management, Elsevier, vol. 17(2), pages 175-183, June.
    55. Jagersma, P. K. & van Gorp, D. M., 2003. "International divestements--an empirical perspective," Business Horizons, Elsevier, vol. 46(6), pages 61-69.
    56. Bent Petersen & Torben Pedersen & Marjorie A Lyles, 2008. "Closing knowledge gaps in foreign markets," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(7), pages 1097-1113, October.
    57. John V. Gray & Brett Massimino, 2014. "The Effect of Language Differences and National Culture on Operational Process Compliance," Production and Operations Management, Production and Operations Management Society, vol. 23(6), pages 1042-1056, June.
    58. Henisz, Witold J, 2000. "The Institutional Environment for Multinational Investment," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 16(2), pages 334-364, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dachs, Bernhard & Kinkel, Steffen & Jäger, Angela, 2019. "Bringing it all back home? Backshoring of manufacturing activities and the adoption of Industry 4.0 technologies," Journal of World Business, Elsevier, vol. 54(6), pages 1-1.
    2. Rajneesh Narula & Andrea Martínez-Noya, 2014. "International R&D Alliances by Firms: Origins and Development," John H Dunning Centre for International Business Discussion Papers jhd-dp2014-06, Henley Business School, University of Reading.
    3. Robert-Nicoud, Frédéric & Olarreaga, Marcelo & Carrère, Céline & Fugazza, Marco, 2016. "On the heterogeneous effect of trade on unemployment," CEPR Discussion Papers 11540, C.E.P.R. Discussion Papers.
    4. Gregory Theyel & Kay Hofmann & Mike Gregory, 2018. "Understanding Manufacturing Location Decision Making: Rationales for Retaining, Offshoring, Reshoring, and Hybrid Approaches," Economic Development Quarterly, , vol. 32(4), pages 300-312, November.
    5. Reddy, Kotapati Srinivasa, 2016. "Institutional Voids and Tax litigation in Emerging Economies: The verdict of Vodafone cross-border acquisition of Hutchison," MPRA Paper 74264, University Library of Munich, Germany, revised 2016.
    6. Suder, Gabriele & Liesch, Peter W. & Inomata, Satoshi & Mihailova, Irina & Meng, Bo, 2015. "The evolving geography of production hubs and regional value chains across East Asia: Trade in value-added," Journal of World Business, Elsevier, vol. 50(3), pages 404-416.
    7. McIvor, Ronan & Bals, Lydia, 2021. "A multi-theory framework for understanding the reshoring decision," International Business Review, Elsevier, vol. 30(6).
    8. Wieland, Andreas & Bals, Lydia & Mol, Michael J. & Handfield, Robert B., 2020. "Overcoming blind spots in global sourcing research: Exploiting the cross-sections between supply chain management and international business," Journal of International Management, Elsevier, vol. 26(1).
    9. Niccolò Pisani & Joan Enric Ricart, 2016. "Offshoring of Services: A Review of the Literature and Organizing Framework," Management International Review, Springer, vol. 56(3), pages 385-424, June.
    10. Fuster, Begoña & Lillo-Bañuls, Adelaida & Martínez-Mora, Carmen, 2020. "Reshoring of services and employment," Structural Change and Economic Dynamics, Elsevier, vol. 54(C), pages 233-246.
    11. Ryan W. Tang & Ying Zhu & Hongbo Cai & Jinrong Han, 2021. "De-internationalization: A Thematic Review and the Directions Forward," Management International Review, Springer, vol. 61(3), pages 267-312, June.
    12. McWilliam, Sarah E. & Kim, Jung Kwan & Mudambi, Ram & Nielsen, Bo Bernhard, 2020. "Global value chain governance: Intersections with international business," Journal of World Business, Elsevier, vol. 55(4).
    13. Björn Röber, 2020. "Escalating internationalization decisions: intendedly rational, but only limitedly so?," Business Research, Springer;German Academic Association for Business Research, vol. 13(2), pages 455-484, July.
    14. Julien Gooris & Carine Peeters, 2014. "Fragmenting global business processes: A protection for proprietary information," Working Papers 2014-12, CEPII research center.
    15. Lorena D’Agostino, 2015. "The neglected effects of R&D captive offshoring in emerging countries on the creation of knowledge at home," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(1), pages 61-91, March.
    16. Schmeisser, Bjoern, 2013. "A Systematic Review of Literature on Offshoring of Value Chain Activities," Journal of International Management, Elsevier, vol. 19(4), pages 390-406.
    17. Mukherjee, Debmalya & Lahiri, Somnath & Ash, Steven R. & Gaur, Ajai S., 2019. "Search motives, local embeddedness, and knowledge outcomes in offshoring," Journal of Business Research, Elsevier, vol. 103(C), pages 365-375.
    18. Christos N. Pitelis & David J. Teece, 2018. "The New MNE: ‘Orchestration’ Theory as Envelope of ‘Internalisation’ Theory," Management International Review, Springer, vol. 58(4), pages 523-539, August.
    19. Oladottir, Asta Dis & Hobdari, Bersant & Papanastassiou, Marina & Pearce, Robert & Sinani, Evis, 2012. "Strategic complexity and global expansion: An empirical study of newcomer Multinational Corporations from small economies," Journal of World Business, Elsevier, vol. 47(4), pages 686-695.
    20. Paul, Justin & Feliciano-Cestero, María M., 2021. "Five decades of research on foreign direct investment by MNEs: An overview and research agenda," Journal of Business Research, Elsevier, vol. 124(C), pages 800-812.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:169:y:2015:i:c:p:141-155. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.