Determinants of relocation mode choice: effect of resource endowment, competitive intensity and activity character

Abstract

The study investigates the factors determining relocation mode choice (in-house sourcing, outsourcing, captive offshoring, offshore outsourcing) and provides an insight into the behaviour of companies from a transition economy. A multinomial logit model run on a sample of 150 Polish companies from the automotive and clothing industries allows us to refer to four hypotheses based on strategic management literature emphasising core activities, resource endowment and competition intensity. Our research indicates that relocations undertaken by firms operating in a transition economy such as Poland are characterised with unique qualities that are not frequently associated with business entities from developed economies. In particular, relocation of R&D and management functions does not increase probability of using internal relocation modes compared to external ones. When relocating such core activities companies in our sample are more likely to use offshore outsourcing than outsourcing. More resource-endowed firms are more likely to use other relocation modes than outsourcing. The competitive pressure increases the probability of outsourcing and captive offshoring to in-house sourcing.