Drivers of location advantages in the medical device industry: a qualitative study

For decades, firms expanded their manufacturing to global locations in search of opportunities that add value in materials and services to their products in order to improve organizational performance. More recent activities focus on relocating production back to their home country, called reshoring, to gain domestic advantages and mitigate disadvantages. This appears to be particularly evident in the U.S. healthcare industry. Recent policy changes at the federal and local levels demand more domestically produced products. There are a variety of considerations for relocation strategies that determine the associated advantages such as product safety and security, availability, and workforce skills. The complexity of reshoring decisions persists, primarily due to product and industry specific characteristics that significantly influence the manufacturing process and interact with firm capabilities. Therefore, this study explores the drivers of location advantages in the medical device industry, building on prior research that underscores that international location decisions should be guided by considerations unique to the industry and product context. We conducted a series of interviews with decision-makers and interpreted the findings through the four sub-paradigms of location advantages in the ownership, location, and internationalization (OLI) theory. We find that past location strategies in manufacturing medical devices are primarily driven by cost efficiency, as is true in many other industries. However, the current decisions do not fully address the disconnect between location decision considerations and essential strategic outcomes, such as quality. In addition to costs, industry-specific drivers and the resulting location advantages can impact the manufacturing process, both positively and negatively. Thus, safety and security, quality, and accessibility of these products need to be integrated into location decision making. Practical implications for what drivers should be particularly addressed in medical device manufacturing are also discussed. This study contributes to the literature by extending the OLI framework to both offshoring and reshoring decisions and then examining this relationship empirically.