Replacing global sourcing with deep localisation: the role of social capital in building local supply chains

Abstract

With globalisation still on the rise firms precede building their global supply bases in order to defend or improve their position against domestic as well as international competitors. However, when focusing on low-cost countries this picture turns reverse. Caused by government policies as well as purchasing strategies employed, more and more firms decide to shift their focus from global to local sourcing. Some firms even go as far as establishing entirely local supply chains, a strategy also understood as deep localisation. Drawing on social capital theory, we examine the role that social capital pillars can play for the successful outcome of deep localisation projects. Here, we make use of the unique situation that deep localisation offers and focus on social capital in network relationships. Through applying case study methodology, we compare successful and non-successful cases, analysing data from an automotive OEM as well as 1st and 2nd tier suppliers. Results indicate that social capital can have a facilitating effect. The study extends literature on global sourcing and social capital theory and suggests important implications for research and practice.