Offshore Strategy Research Articles

Post-offshoring manufacturing strategies: decision-making and implementation

PurposeThe advantages of offshoring are increasingly under scrutiny, and coronavirus disease 2019 (COVID-19) has advanced the debate, calling for a redefinition of firms' production location strategies. While attention has primarily focused on the relocation of second-degree strategies, such as back-shoring, near-shoring and further offshoring, there are also other alternatives, including home country-based domestic product and process innovations, and the development of new business activities. The objective of the authors' paper is to identify which factors influence decision-makers when they select and implement such post-offshoring strategic alternatives.Design/methodology/approachThe authors consider 11 Italian manufacturing companies that implemented these strategies and analyze triggers, drivers, enabling factors and barriers of the decision phase, as well as content, governance mode and timing of the implementation phase.FindingsBased on the collected findings, the authors suggest a set of propositions for further research. First of all, firms can simultaneously manage multiple strategies by adopting an ambidextrous approach through which to mitigate supply chain risks. They may integrate their domestic and international production activities, but the home country remains central for innovations and production of high-end products and Industry 4.0 technologies increases the probability of investing in their home country. At the same time, lack of competence induces selective near- and back-shoring, while full back-shoring is mainly a consequence of managerial mistakes. Competence availability acts as a barrier to relocation in the home country, inducing the implementation of either an insourcing strategy or a combination of insourcing and outsourcing.Originality/valueThe authors' work identifies post-offshoring as a dynamic process and provides insights into the post-pandemic scenario. The conceptual framework may represent a useful tool for company managers in re-evaluating their initial offshoring strategies.

The persistence and cross-persistence of R&D outsourcing: onshore and offshore strategies

ABSTRACT Research and Development (R&D) outsourcing has rapidly grown in recent decades but little attention has been paid to the persistence with which these contracts are carried out. In this way, this study contributes to the literature by providing new evidence on the extent of true state dependence in explaining the persistence of outsourcing R&D to a type of contractor. Further, we explicitly distinguish between offshore and onshore outsourcing strategies and study their own- and cross-state dependence. In doing so, we estimate a set of dynamic models of strategy adoption using a panel of Spanish manufacturing firms from 2005 to 2014. The data allow for the distinction between five types of contractors and their domestic or foreign origin in each of them. Our results support the idea that R&D outsourcing with a type of contractor exhibits true-state dependence although moderate, with onshore R&D outsourcing being more state-dependent than its offshore counterpart. Results also indicate the existence of cross-state dependence in both directions.

The political economy of a tax haven: the case of Mauritius

The literature on Global Wealth Chains (GWC) has analysed how value is captured across different segments of offshore financial sector activities. A division of labour has emerged, with financial centres in North America, Europe and East Asia capturing most value out of GWCs while other tax havens remain stuck in low-value GWC segments or in positions of dependency on larger financial centres. This paper analyses how one prominent tax haven (Mauritius) established its position in the GWC while being stuck in low-value GWC segments. The paper analyses both how offshore strategies transformed the country’s political economy but also how such strategies shape contemporary vulnerabilities. In the 1980s, with the Mauritian economy in dire need of foreign exchange, the government adopted an offshore strategy. Mauritius’ offshore growth has contributed to a vast inflow of foreign exchange for an otherwise import-dependent economy. Offshore has also contributed to social and economic benefits for segments of the population. However, the vulnerabilities and detrimental effects of this strategy are now increasingly visible. As Mauritius’ example shows, when countries are locked into low-value GWC segments, tax haven strategies may only be a short-term band-aid, substituting one form of dependency (commodity dependence) for another (offshore finance).

Comparing Offshore Support Vessel Production Times between Different Offshoring Strategies Practiced at Norwegian Shipyards

To save costs and build competitiveness, Norwegian shipyards usually offshore some of the processes required to produce a ship, especially steel-related tasks, i.e., they have them carried out in a country with lower factor costs. This study aims to provide some quantitative evidence of the relationship between the degree of offshoring and the production time of offshore support vessels (OSVs) delivered from Norwegian shipyards. It builds upon a recent article that introduced a typology of offshoring in ship production (Semini et al. 2018, Journal of Ship Production and Design, 34(1), 59–71). We take into account contextual factors that are also expected to affect the production time of OSVs, in particular ship size and complexity, repeat production, and the global market situation. We apply multiple regression analysis on a sample of 156 OSVs delivered from nine Norwegian shipyards between 2010 and 2018. Each of these ships was, by plan and strategy, partly produced at a foreign yard, before one of the Norwegian yards took over, completed production, commissioned, tested, and finally delivered the ship. Results suggest that the higher the degree of offshoring is, the longer is the total ship production time. Only ship size explains even more of the production time variability in the sample than offshoring strategy. In addition to these two factors, evidence suggests that also repeat production and the global market situation have a significant impact on the production time. Our study contributes to the literature on the relationship between strategy and performance in shipbuilding. It provides new insights into how offshoring strategy and contextual, product- and market-related factors relate to ship production time based on quantitative, empirical evidence. From a methodological perspective, it illustrates how multiple regression analysis can be applied to ship-specific data as a benchmarking tool to measure and compare shipbuilding performance. Findings are first and foremost valid for the ships included in the study, which opens numerous opportunities for further research.

Modeling the Cost-Effectiveness of Latent Tuberculosis Screening and Treatment Strategies in Recent Migrants to a Low-Incidence Setting.

Many tuberculosis (TB) cases in low-incidence settings are attributed to reactivation of latent TB infection (LTBI) acquired overseas. We assessed the cost-effectiveness of community-based LTBI screening and treatment strategies in recent migrants to a low-incidence setting (Australia). A decision-analytical Markov model was developed that cycled 1 migrant cohort (≥11-year-olds) annually over a lifetime from 2020. Postmigration/onshore and offshore (screening during visa application) strategies were compared with existing policy (chest x-ray during visa application). Outcomes included TB cases averted and discounted cost per quality-adjusted life-year (QALY) gained from a health-sector perspective. Most recent migrants are young adults and cost-effectiveness is limited by their relatively low LTBI prevalence, low TB mortality risks, and high emigration probability. Onshore strategies cost at least $203,188 (Australian) per QALY gained, preventing approximately 2.3%-7.0% of TB cases in the cohort. Offshore strategies (screening costs incurred by migrants) cost at least $13,907 per QALY gained, preventing 5.5%-16.9% of cases. Findings were most sensitive to the LTBI treatment quality-of-life decrement (further to severe adverse events); with a minimal decrement, all strategies caused more ill health than they prevented. Additional LTBI strategies in recent migrants could only marginally contribute to TB elimination and are unlikely to be cost-effective unless screening costs are borne by migrants and potential LTBI treatment quality-of-life decrements are ignored.

Back-shoring vs near-shoring: a comparative exploratory study in the footwear industry

After decades of off-shoring strategies, companies are often critically re-evaluating their earlier location decisions; in doing so, sometimes they implement the so-called relocation of second degree. Among them, back-shoring (i.e., relocation to the home country) and near-shoring (relocation to the home region) are two of the alternatives attracting growing interest from scholars. This paper aims to shed new light on the variables influencing the choice made between these two alternatives. As requested in the extant literature, a contingency approach is adopted, focusing attention on the footwear industry. Given the exploratory nature of the paper, evidence from 41 back-shoring and near-shoring strategies are analysed, comparing data from Spanish and Italian companies. Collected data are adapted to test hypotheses concerning three sets of variables: firms’ characteristics, motivations for the second degree relocation and its barriers. Collected data show that firm’s size directly influences the chosen alternative since larger companies prefer to near-shore instead of back-shore. When considering motivations, while the “made in” effect does not influence the firm’s choice, availability of skilled contractors and/or government aids induces companies to relocate to the home country instead of the home region. Finally, companies fearing encountering barriers, in terms of skilled contractors’ availability and/or (re-)development of internal manufacturing competences, will prefer the back-shoring rather than the near-shoring option. The study is focused on two countries (Spain and Italy) where the manufacturing sector (and the footwear industry within it) is still relevant to the local economy. Findings cannot be generalized to countries/industries where the local industry has been totally dismantled, without a previous in-depth analysis. The findings obtained offer managers useful insights on the elements that should be carefully evaluated when considering back- and near-shore alternatives. Additionally, valuable insights are provided for policy makers that plan to design industrial policies supporting back-reshoring policy initiatives. To the best of our knowledge, this is the first paper in the extant literature addressing variables influencing the choice between back- and near-shoring alternatives.

ЧИННИКИ ВПЛИВУ НА ІНВЕСТИЦІЙНІ СТРАТЕГІЇ БНП У СУЧАСНИХ УМОВАХ

Factors influencing investment strategies of multinational enterprises are identified, particularly factors of COVID-19 pandemic, geopolitical stability, and national security. It is revealed that COVID-19 pandemic forces multinational enterprises to transform approaches to investment strategies towards stabilization and diversification of supply chains, robotization of production. It is determined that due to the need to comply with safe working conditions, investment in robotics development become an integral part of investment strategies. It has been determined that the offshoring strategy in the conditions of sustainability of trade and production relations has proved its effectiveness in reducing costs. However, during pandemic or trade war, the offshore strategy is less effective. Prospects of future development of investment strategies are determined, namely reshoring, diversification, regionalization, and replication. It is determined that due to the increase in the level of risks; new investment projects “from scratch” become less attractive. It is determined that multinational enterprises do not want to move production capacities, as it requires significant investments and losses from the relocation of production. It is revealed that geopolitical conflicts may transform investment strategies, stimulating relocation of production, such as reshoring and nearshoring. It has been determined that reshoring and nearshoring do not necessarily increase the stability of supply chains. It is determined that the import of industrial products from China to the USA is declining for several years in a row, and there is a shift of production from China to other countries. It is determined that the strategy of reindustrialization do not necessarily contribute to the growth of industrial production in the United States. It is determined that within the USA there are several problems concerning reindustrialization, including low return on investment in robotization of production and lack of qualified personnel. It is determined that the factor of national security becomes more important for the investment strategies of multinational enterprises in the conditions of unfolding economic contradictions.

Rethinking Offshoring and International Marketing Strategies during the COVID-19 Pandemic

ABSTRACT This teaching case focuses on the national and international expansion of IGT Motors, a Brazilian company operating in the market for twenty years that has moved most of its production to China since 2010. Nearly after the company started searching for new markets abroad and adapted its internal and communication processes to comply with other countries’ preferences and regulations, the outbreak of the COVID-19 pandemic led top management to rethink its production and marketing strategies, specifically hit by involving China, country of origin of the virus. The case is about how small companies in the midst of a global expansion can deal with unexpected scenarios and emerging crisis, engaging students to reflect upon the initiatives that might be taken to overcome issues such as consumer animosity, but also to make the company less susceptible to similar situations in the future.

Rethinking Offshoring and International Marketing Strategies during the COVID-19 Pandemic

ABSTRACT This teaching case focuses on the national and international expansion of IGT Motors, a Brazilian company operating in the market for twenty years that has moved most of its production to China since 2010. Nearly after the company started searching for new markets abroad and adapted its internal and communication processes to comply with other countries’ preferences and regulations, the outbreak of the COVID-19 pandemic led top management to rethink its production and marketing strategies, specifically hit by involving China, country of origin of the virus. The case is about how small companies in the midst of a global expansion can deal with unexpected scenarios and emerging crisis, engaging students to reflect upon the initiatives that might be taken to overcome issues such as consumer animosity, but also to make the company less susceptible to similar situations in the future.

Analysing Banking Data to Reveal Offshore Strategies

Analysing Banking Data to Reveal Offshore Strategies

Industry 4.0 technologies and manufacturing back-shoring: a European perspective

Over the last two decades, companies have increasingly been re-evaluating their off-shoring strategies and implementing decisions on relocations of second degree (RSD). In some cases, the RSD decision has been implemented through back-shoring. The topic has attracted the attention of several scholars, some of whom have specifically investigated the role of Industry 4.0 technologies in the back-shoring decision-making process. This paper aims to shed new light on the role that Industry 4.0 technologies play as a driver or an enabling factor for companies that are evaluating RSD alternatives. A two-step explorative approach has been used for this research. In the first step, a theoretical approach has been followed by developing a structured literature review based on 115 Scopus-indexed journal articles. The second step of the methodology is based on the empirical evidence of European countries using the UnivAQ manufacturing reshoring dataset. The collected data provides evidence of the growing interest of scholars in this issue; however, attention has mainly been focused on two single technologies, production automation and additive manufacturing. The empirical data offers interesting findings in terms of industry and geographic characterisation.

The Influence of Sea Power on Politics: Domain- and Platform-Specific Attributes of Material Capabilities

Students of world politics have long shown a special interest in sea power. International relations, however, tends to treat the means of power as homogeneous and interchangeable. Are military capabilities largely undifferentiated goods, or do specific assets matter for politics? We argue that the characteristics of naval power offer distinctive tradeoffs in terms of the causes of war. Naval presence, firepower, and mobility enable naval nations to fight farther from home and obtain more diplomatic recognition. At the same time, mobility and stealth introduce ambiguity about national priorities and contribute to errors in assessing the local balance of power and resolve. We find empirically that disproportionate investment in sea power is associated not only with heightened diplomatic recognition and power projection across greater distances, as navalists expect, but also with increased instability in the form of a higher risk of dispute initiation. Disaggregating sea power by platform type—battleships, submarines, aircraft carriers—suggests similar tradeoffs across platforms as for navies generally. Sea power enables political leaders to intervene in distant locales, where their interests are more peripheral, and to reconsider their commitments, where their interests do not justify the risk. One counterintuitive implication is that offshore balancing strategies, which rely on sea power for deterrence, may actually be destabilizing.

Influence of country of origin and type of information exchanged on consequences of offshore service sentiment

PurposeThis research extends existing services offshoring literature by investigating how the type of information exchanged, technical support or personal billing, in conjunction with country-of-service-origin (COSO) influences consumer likelihood to react negatively (boycott issue importance, NWOM, perceived service quality) to an offshore service exchange.Design/methodology/approachStructural equations modelling is employed to assess relationships among constructs when country of service origin (New Zealand and the Philippines) and type of service provided (technical support and personal billing services) are varied. Using a scenario-based experimental design we collected 337 responses from a consumer panel across Australia.FindingsResults indicate that both COSO and type of information exchanged affect service sentiment. Overall, consumers feel more negative and more likely to punish a company for offshoring to culturally dissimilar countries such as the Philippines than to culturally similar ones such as New Zealand. However, consumers were more concerned with personal billing services provided from offshore providers than technical support, regardless of COSO.Practical implicationsPractitioners need to understand customer sentiment about services offshoring in general as well as the relationship between service type and country of service origin when designing the global service supply chain.Originality/valueThis study extends theory by applying a multi-dimensional portfolio perspective in examining customer sentiment of offshore services. Understanding the underlying bases of customer concerns and how companies can mitigate negative perceptions allows firms to better manage service offshore strategy.

Space-use strategy affects energy requirements in Barents Sea polar bears

Polar bearsUrsus maritimusare currently facing rapid environmental changes with loss of sea ice and shifts in their prey distribution. Two distinct ecotypes exist in the Barents Sea, where sea ice is decreasing at the highest rate in the Arctic. Coastal bears remain within the Archipelago of Svalbard year-round, whereas offshore bears follow the marginal ice zone (MIZ). We explored these 2 ecotypes’ habitat use, activity and energy needs as well as seasonal variation within these parameters. During the period from 2011-2018, adult female polar bears were equipped with GPS collars and activity sensors (n = 84); 46 of these were equipped with conductivity switches to record aquatic behaviour. Offshore bears travelled longer distances at a higher speed on land and at sea away from land and had a higher activity rate compared to coastal bears. This translated into higher overall energy expenditure. Offshore bears also undertook more distant and energetically costly trips from land to the MIZ, swimming in open water. Both ecotypes showed similar seasonal patterns of activity and movement consistent with their life history linked to sea ice phenology. Despite higher energy expenditure, the offshore strategy seemed to be as profitable as the coastal one as females had marginally better spring body condition, likely due to their specialized high caloric diet of seals throughout the year. However, both ecotypes are currently experiencing habitat changes. Future studies should aim to predict how rapidly declining sea ice in the Barents Sea may challenge polar bears energetically during the coming decades.

Does the direction of offshoring matter? Comparison of downward and upward offshoring strategies in changing consumers’ brand perception by brand tiers

Offshoring strategies raise a critical question to defining the country images of brands, as offshoring results in discrepancies between the country-of-brand origin (COB) and the country-of-manufacture (COM) by relocating COM from the home to another country. Based on cognitive dissonance theory and social exchange theory, this study assesses the outcomes of apparel brands’ differing types of offshoring strategies by tracing consumers’ brand perception as these change after the revelation of offshoring information, particularly by comparing those outcomes between an upscale brand and a midmarket brand. Results from an experimental study revealed that a brand originating from a developed country’s offshoring from a developing country can significantly decrease brand credibility and prestige, while a brand originating from an emerging country’s offshoring from a developed country does not significantly improve those brand assets in either the upscale or the midmarket brand contexts. The paper concludes with a discussion of theoretical and managerial implications along with suggestions for future research.

Offshoring and Skill-Biased Technical Change in the Context of US Protectionism

We discuss the effects of offshoring on the labor market in a matching model with endogenous adjustment of educational skills. We carry out a comparative statics analysis and show that offshoring leads to a restructuring of the economy through skill-biased technical change (SBTC) where overall welfare is improved. In a policy exercise we show that, if offshoring were to be opposed by a protectionist agenda, labor market flexibility can bring about the same welfare gain. In addition, we offer an empirical analysis aimed at verifying the correlation be- tween offshoring and SBTC in US manufacturing industries in recent years. Our results show that different offshoring strategies affect SBTC differently. In particular, the evidence suggests that while high-skill offshoring strategies open the skill gap, low-skill offshoring strategies tend to work in the opposite direction.

Rebalancing Offshore Balancing

ABSTRACT: Long, indecisive wars in Afghanistan and Iraq have led some to propose a middle ground between intervening too much and too little. One prominent strategy for this called offshore balancing. With ships on the water instead of boots on the ground, power and stability would be projected at seemingly little cost or risk. Offshore balancing, however, would be tantamount to an unstable selective isolationism leading to a delayed and perhaps more costly intervention. ********** Mearsheimer and Walt's Offshore Balancing Perhaps the greatest interest to defense practitioners the recent proposal of the University of Chicago's John Mearsheimer and JF Harvard's Stephen Walt for an offshore strategy. (1) As realists, they recognize not all regions reflect American national interests; many states can be left to sort out their difficulties without our help. In a swipe at neoconservatives, they decry the misguided grand strategy of liberal hegemony that includes spreading democracy. Instead, Mearsheimer and Walt propose a realist grand strategy that would concentrate on preserving U.S. dominance in the Western Hemisphere and countering potential hegemons in Europe, Northeast Asia, and the Persian Gulf. They would have the United States contribute to a regional balance carried out chiefly by local powers while American Military Power would remain offshore as long as possible. (2) These scholars call this a strategy with a limited agenda, but it could easily lose its limits--for example, they admit a fast-rising China is likely to seek hegemony in Asia, the United States should undertake a major effort to prevent. European NATO members should take the lead in Europe and the Russians in Syria. (3) But, what happens when these areas blow up? The devil in the details, and the generic problem of offshore balancing how to control events on land from the sea. Which shores? Mearsheimer and Walt do not mean our own shores--something they might have considered, but would basically amount to isolationism. (4) They have no interest in the southern and eastern Mediterranean basin, including Syria, where the Russians have a small naval base at Tartus. These are areas, however, where unrest sprouts and spreads. If the Islamic State in Iraq and the Levant a menace in Iraq, it does not cease to be a menace when it crosses into Syria. Can local forces handle it with Iranian and Russian help? Surely, we do not wish to see stronger Iranian and Russian roles in the region. A victory for Iran would solidify its Shiiah corridor through Iraq and Syria into Lebanon, an uncomfortable development not least for emboldening Hezbollah, Iran's Lebanese outlet, to start a new war with Israel. Standing offshore in the Persian Gulf would not block the Shiah corridor. The situation could resemble the Tonkin Gulf, where the events of August 1964 illustrated how offshore operations easily become stepping stones to onshore wars. Moreover, US ships must come into port to refuel, which could resemble the Gulf of Aden in 2000 where an al-Qaeda boat crammed with explosives blew a big hole in the USS Cole, killing 17 American sailors. We can, of course, refuel from supply ships, but they in turn become the targets. The point there no such thing as sitting completely offshore, a land connection always requires onshore security. Is offshore balancing inexpensive? American offshore power projection chiefly revolves around carrier strike groups, each consisting of a carrier surrounded by escort vessels to protect it. As Lawrence Korb, a former Navy officer who also served as assistant secretary of defense, told the US Army War College in the early 1990s, these floating cities are the most expensive way to project power, far more expensive than land-based forces. And offshore costs are born entirely by US taxpayers; whereas American land bases are usually subsidized by the host country, such as Germany, Japan, and South Korea, which contribute free rent, base construction, and maintenance. …

A Decisional Framework of Offshoring: Integrating Insights from 25 Years of Research to Provide Direction for Future*

Mirroring the growing trend for firms to support their operations by locating activities abroad, research on the practice of offshoring has increased considerably in recent years. However, despite the mounting research, understanding of the key factors influencing decision-making for offshoring remains surprisingly limited due to fragmentation. In this study, we synthesize and integrate insights from different research domains in order to develop a comprehensive decisional framework for key offshoring decisions. The integrative decisional framework is based on a systematic review of offshoring research published in the most influential management and business journals in the past 25 years. In addition to providing a snapshot of the state of research on decision-making for offshoring, this study aims to stimulate future research by identifying promising research opportunities. In particular, we propose that future research should use alternative theories to incorporate overlooked aspects of decision-making, integrate different theories to account for the interdependencies between decisions, and adopt a portfolio perspective that considers each decision as part of an overall offshoring strategy.

Consumer boycott of companies implementing offshoring strategies

Questo lavoro analizza una specifica risposta negativa del consumatore alla decisione dell’impresa di delocalizzare le proprie attivita all’estero, ossia l’intenzione di boicottare l’impresa. A tal fine, lo studio propone, e verifica empiricamente, il processo sottostante tale reazione del consumatore. I risultati dimostrano (1) il ruolo di mediazione dell’atteggiamento del consumatore nei confronti del boicottaggio e (2) il ruolo di moderatore dell’etnocentrismo del consumatore, esercitati nel rapporto di influenza tra la percezione di oltraggio legata alla delocalizzazione dell’impresa e l’intenzione conseguente del consumatore di boicottarla. Riconoscendo nel boicottaggio dell’impresa che decide di delocalizzare all’estero le proprie attivita una seria minaccia per l’impresa stessa, questo studio cerca di analizzare approfonditamente il fenomeno e di fornire utili suggerimenti su come affrontarlo.

The future role of the United States in the Asia-Pacific region: dead end or crossroads?

The Asia-Pacific remains a region of central importance for US foreign policy. In this vital region, core US geopolitical, security and economic interests intersect. US policy in the Asia-Pacific not only seeks to maintain and develop its security and economic relationships with long-standing allies and partners, but also to confront its most powerful rival and competitor, China. Offshore balancing has always been a very important, and mostly effective, way for the United States to protect its interests in different regions. Currently, the United States is building more comprehensive engagement in the Asia-Pacific in an attempt to balance against increasing Chinese power and influence in the region. The leading edge of this approach is a more comprehensive suite of diplomatic initiatives aiming to integrate defence, diplomacy and development. This is the framework for Obama's Smart Power strategy, which seeks to employ both the hard and soft power assets held by the United States, but in reality it is just another manifestation of offshore balancing strategy.