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Captive Offshoring of New Product Development in Brazil

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  • Dirk M. Boehe

    (Insper Institute of Education and Research)

Abstract

This paper focuses on captive offshoring of new product development (NPD), i.e., relocating projects or project phases to foreign-based, wholly-owned, multinational corporation (MNC) subsidiaries (captive offshore units) to benefit from cost and efficiency advantages and/or from access to complementary technological resources and capabilities. Adopting a host country perspective, we theorize why different forms of local collaboration may complement or conflict with efficiency-seeking or arbitrage strategies and may thus influence why captive offshore units receive new product development orders from other MNC units located abroad. Using a sample from Brazil and applying structural equation modeling with partial least squares (PLS), we find that local NPD outsourcing constitutes a complementary relationship, while local cooperation with clients creates a trade-off relationship with captive offshoring. That these relationships are moderated by the captive offshore unit’s cost position within the MNC suggests that arbitrage effects transcend the headquarter-subsidiary relationship into the sphere of MNC subsidiaries’ local collaborations. Our findings imply that arbitrage in multinational contexts affects the interdependence between resources and transaction costs.

Suggested Citation

  • Dirk M. Boehe, 2010. "Captive Offshoring of New Product Development in Brazil," Management International Review, Springer, vol. 50(6), pages 747-773, December.
    • Handle: RePEc:spr:manint:v:50:y:2010:i:6:d:10.1007_s11575-010-0054-z
    DOI: 10.1007/s11575-010-0054-z
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    3. Mashiho Mihalache & Oli R. Mihalache, 2020. "What is Offshoring Management Capability and How Do Organizations Develop It? A Study of Dutch IT Service Providers," Management International Review, Springer, vol. 60(1), pages 37-67, February.
    4. Yvonne McNulty & Helen Cieri, 2011. "Global Mobility in the 21st Century," Management International Review, Springer, vol. 51(6), pages 897-919, December.
    5. Thakur-Wernz, Pooja & Bruyaka, Olga & Contractor, Farok, 2020. "Antecedents and relative performance of sourcing choices for new product development projects," Technovation, Elsevier, vol. 90.
    6. Sidney Costa & Felipe Mendes Borini, 2017. "Global Innovation in Foreign Subsidiaries: The Impact of Entrepreneurial Orientation and Corporate Networks," Brazilian Business Review, Fucape Business School, vol. 14(4), pages 417-434, July.
    7. 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.
    8. Rodgers, Peter & Khan, Zaheer & Tarba, Shlomo & Nurgabdeshov, Assylbek & Ahammad, Mohammad F., 2019. "Exploring the determinants of location choice decisions of offshored R&D projects," Journal of Business Research, Elsevier, vol. 103(C), pages 472-483.

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