Offshoring and backshoring: A multiple case study analysis

Motivations underscoring offshoring and backshoring are typically investigated as separate entities in the academic literature. This separation undermines a deeper comprehension of the two phenomena, and implicitly denies the conceptualization of backshoring as a possible step of the firm internationalization process. Our paper seeks to fill this gap by (1) understanding the relations (if any) among offshoring and backshoring motivations at firm level; (2) exploring whether backshoring is a “failure” of the offshoring initiative, or rather the evolution of the firm's competitive and location strategies. A content-based literature review provides the base for the identification of the key motives for offshoring and backshoring, which are then organised using a theory-grounded framework. Next, we conduct a multiple case study analysis based on four companies, searching for common patterns in offshoring and subsequent backshoring initiatives. Cases allow understanding how the motivations (Why) connect with the governance modes (How), and the location choice (Where). Building on the case findings, the paper presents some propositions for future empirical research.     

Entry modes in reshoring strategies: An empirical analysis

The Entry Mode (EM) choice is a fundamental issue in reshoring initiatives. Despite several authors have studied the determinants of offshoring EM, no study has investigated so far the factors affecting the reshoring EM and its relation with the offshoring EM. The purpose of this paper is to examine which factors influence entry mode choice in reshoring initiatives. We develop a conceptual framework that explains the reshoring EM in terms of country-, industry-, firm- and project-specific factors, in addition to the offshoring EM choice. Next, we test this model by using a sample of 677 cross-industry and cross-country reshoring projects. Based on the results, we find that offshoring EM significantly constrains the subsequent reshoring EM. More in detail, firms adopting offshore insourcing entry modes tend to retain these modes in reshoring. Furthermore, reshoring EM is explained by industry- and project-specific factors, while offshoring EM is influenced by a broader set of industry-, country-, and firm-specific factors. This study fills a gap in the reshoring literature by analysing influential factors in EM choice and by offering a comparison between the determinants of offshoring and reshoring EM.     

Offshoring: Dimensions and diffusion of a new business concept

In order to leverage global cost differentials, companies are increasingly turning to offshoring. Nevertheless, discussions in research and practice on offshoring are characterized by the lack of a common definition as well as a theoretically grounded explanation for this phenomenon. This article presents an explicit definition in order to provide a stringent understanding of the term offshoring along the dimensions of contractual/legal arrangement and geographic location. Further, the driving forces of offshoring are analysed on the environmental and company levels. The article closes with a discussion of managerial implications and an outlook on aspects for further research.     

Relocation of second degree: Moving towards a new place or returning home?

We study the “Relocations of Second Degree” (RSDs), i.e., the location decisions that modify the country of destination of a previous offshoring investment. Specifically, we distinguish between two types of RSDs, i.e., “Relocation to the Home Country (RHC)”, also known as back-reshoring, and “Relocation to a Third Country (RTC)”, i.e., the choice to move to a second host country.Specifically, we explore how the location advantages underlying the previous offshoring decision affect the probability to undertake an RHC, rather than an RTC. Location advantages reflect the favourable conditions that a foreign country offers with respect to the home one, in terms of market-seeking, asset-seeking and efficiency-seeking (i.e., cost-saving and productivity-enhancing) opportunities. Using data from the European Restructuring Monitor, we focus on the RSDs regarding manufacturing activities, implemented across European countries between 2002 and 2015. We find that, on the one hand, when a previous offshoring investment is driven by market-seeking location advantage, firms undertaking the RSD are more likely to opt for an RHC, except during the economic crisis where market-seeking European firms seem to prefer RTCs. On the other hand, RTC is a preferred choice when the location advantage is of efficiency-seeking type. In addition to offering a broader characterization of RSDs, our study provides empirical evidence of the relationship between the offshoring and relocation decisions. Managers should be aware of this connection when designing their manufacturing internationalization strategies.     

Offshoring knowledge and service work: A conceptual model and research agenda

This paper presents two complementary conceptual models that help shed light on the complexities of offshoring service and knowledge work. In developing the model, we draw upon existing literature in the realm of service operations and delivery and build on insights from allied areas such as management and practice. The models offer a simple yet powerful way to conceptualize offshoring of knowledge and service work and to identify the inherent challenges that such strategies entail. The evolutionary model of offshoring parallels well-established work in the manufacturing literature to present a sequential view of building organizational competence in offshoring. The implications of the conceptual models have been discussed in a range of propositions that can be viewed as foundations for new inquiry in this research stream.     

Offshoring technology innovation: A case study of rare-earth technology

Many US firms are improving their individual competitiveness by offshoring manufacturing operations, services and, increasingly, knowledge work. Although research to date has maintained that these practices are beneficial to the offshoring firm and national economies, by reducing costs and expanding markets, little is known about the longer term effect of offshoring on the rate of innovation of home economies. This paper suggests that offshoring practices have adverse effects on innovation at the national home base. The analysis uses patents in the rare-earth element industry, a high-tech area which is among those that have evolved the furthest towards outsourcing and relocation away from the US and to developing countries. Looking at the rare-earth industry can provide insights in identifying potential long term impacts of offshoring on innovation because many other US industries are likely to adopt similar offshoring strategies.     

Offshoring,globalization, and welfare

We investigate the issue of offshoring in a general-equilibrium model of two countries and one sector of increasing returns to scale. Our model uncovers that offshoring occurs and endogenously evolves in a bell-shaped pattern when trade costs decline, explaining some stylized facts in developed countries. Furthermore, this simple framework can be applied to examine the welfare issue. We find that a fall in offshoring costs benefits the high-wage country but hurts the low-wage country. On the other hand, the low-wage country benefits with trade liberalization. The impact of falling trade costs on the welfare of the high-wage country depends on the values of offshoring freeness.     

Open the box: A behavioural perspective on the reshoring decision-making and implementation process

In the realm of manufacturing location decisions, reshoring has increasingly attracted the attention of practitioners, policy makers and scholars. While many articles have analysed the drivers of reshoring decisions, the decision-making and implementation process still lacks empirical analyses. This paper addresses this gap with a grounded theory approach, in particular, through an iterative process going back and forth between the theoretical and empirical worlds. By analysing four cases from the textile-clothing-leather-footwear industry, we demonstrate that the process characteristics are affected by the behavioural features of the decision itself, such as rationality, complexity and anchoring. Our study highlights the relevance of the behavioural approach in reshoring decisions and provides evidence of many challenges that managers should be prepared to face. It further offers advice to policy makers, warning them about the dark side of reshoring and emphasizing their role in supporting companies to take structured rather than intuitive sub-optimal decisions.     

Future changes in sourcing patterns: 2025 outlook for the Swedish textile industry

This study analyzes ongoing changes in sourcing patterns in offshoring and reshoring, and the reasons thereof. It is based on a survey of expectations regarding changing sourcing patterns from now to 2025 in a sample of 119 Swedish buyers of textiles and apparels. The research approach supplements previous studies primarily focusing on contemporary and historical changes. The most important findings related to the dynamics of sourcing patterns are: (i) increasing sourcing in Europe, and (ii) decreasing sourcing in China, partly substituted by expansion in Bangladesh and other low-cost Asian countries. Increasing sourcing from Europe stems from ambitions to enhance supply chain responsiveness through nearshoring in relation to customers. The changes within Asia represent another pattern: low cost-seeking companies plan to turn to countries with lower costs than China. This pattern illustrates extended offshoring through far-shoring. Consequently, the study shows that both nearshoring and far-shoring represent important sourcing approaches. The resulting patterns show considerable variety owing to diversity in contextual conditions. Social, environmental, and political factors are expected to become increasingly important for future sourcing decisions. Of the firm-internal factors, capabilities related to flexibility and responsiveness are assumed to have the most significant impact. The study shows how these factors in combination with other capabilities, firm size, product assortment, and attitudes to geographical proximity drive various sourcing patterns.     

The geographical efficiency of education and research: The ranking of U.S. universities

This paper proposes to study the American efficiency of educational diffusion and research productivity following two distinctions: urban vs. rural areas and public vs. private universities. Following this geographical consideration, knowledge diffusion seems to be homogeneous over the American territory, whereas research productivity is more heterogeneous: American research efficiency decreased of 7% points, due to some rural university localizations. Universities in urban areas favor educational quality through high student selection criteria, contrary to those located in more rural areas. Third, public universities present higher educational efficiency, in favoring educational quality over research productivity: the lesser research efficiency of public institutions comes from difficulties in the management of several campuses, by comparison with the private institutions which are all single-campus.     

Sustainable development and research and development intensity in U.S. manufacturing firms

Across manufacturing sectors, mounting regulatory pressures motivate the adoption of innovative sustainable practices to help address and improve environmental performance. Sustainable practices, however, face many challenges to minimize negative environmental impacts while conserving energy and natural resources. This study seeks to understand the effect of research and development intensity on dimensions of environmental performance in manufacturing firms. Using data from U.S. corporations over the period from 1991 through 2015, we find that sustainable practices are associated with a higher level of negative environmental ratings. In addition, the level of environmental concerns tends to decrease with firm investments in research and development intensity over time. These findings suggest that bigger firms are likely to report a higher level of environmental concerns due to their experimentation with sustainable practices. These firms are also likely to reduce negative environmental ratings over time and realize economies of scale with sustainable manufacturing.     

Exploring the reshoring and insourcing decision making process: toward an agenda for future research

The topics of reshoring and insourcing have recently become more widely discussed among operations management and international business scholars and managers, as some firms are revoking their offshoring and outsourcing decisions. This research focuses on and clarifies the decision making processes related to the two distinct, yet closely related phenomena of reshoring and insourcing. It presents a conceptual framework of all theoretically possible reshoring and insourcing decisions, illustrated in its applicability by a review of the United States and German business press. Then four future research avenues are developed as part of an overall decision making framework together with an overview of specific research questions for this emergent field. Further research avenues include the need to differentiate between reshoring/insourcing as strategic direction or reaction to failure, studying organizational readiness in addition to decision drivers, improve coverage of the implementation stage and explore further contingency factors such as technological advancement as well as to focus on decision makers as the unit of analysis.     

Human resource management practices in Nigeria: challenges and insights

This paper generated current knowledge on aspects of human resource management practices in Nigeria from a sample of 185 human resource management professionals employed in over ninety-six corporations located in three major cities in Nigeria. Furthermore, the convergence/divergence/cross-vergence perspective was utilized to provide theoretical insights on the human resource management practices. The findings support a cross-vergence perspective as evidenced by the blend of human resource management practices reflecting both generalized or standardized practices and localized practices. Implications and direction for further studies are discussed.