Purpose The purpose of this paper is to analyse the risks associated with outsourcing production to emerging countries with lower labour costs, namely China, and study actions and plans used to reduce the influence of factors/drivers that induce these risks. Design/methodology/approach This research uses a multiple case-study methodology, involving seven Canadian manufacturing firms that have chosen an outsourcing strategy in China. It is based on a particular approach of classifying factors/drivers that may generate risks related to this strategy and on interviews with two managers per firm to reduce personal bias. Findings In each of the seven cases studied, outsourcing was chosen to take advantage of lower labour costs in China, but in reality, costs were higher than expected due to unforeseen factors inherent to the risks involved. This study reveals that risks generated by factors/drivers such as lack of experience, reduced control over foreign operations and cultural differences are of major concern for managers outsourcing part of their production to China. However, according to some executives that were interviewed, certain actions can be taken by firms to overcome the negative influence of these factors/drivers. Furthermore, some risks may have multiple causes or be induced by other risks. Research limitations/implications The sample of this study was composed of firms from different industrial sectors, and the authors were therefore unable to analyse sector-specific risks. As the industrial sector has an impact on the technical complexity of the products and their components, it would be appropriate to reconduct our research using samples drawn from similar sectors. Practical implications These findings can help guide the decisions of managers wishing to outsource some of their activities to China and other emerging countries. They will contribute to the success of outsourcing strategies to these countries, as they reveal the risks associated with these strategies and the ways to deal with factors/drivers that can induce them. For example, building long-term relationships with Chinese partners based on collaboration, trust and mutual benefit as well as conducting a rigorous prospecting phase and taking time to select the right subcontractor can have a major impact on reducing risks. Originality/value The main contribution of this work is the analysis of risks associated with outsourcing to China, based on a categorisation of factors/drivers that can generate these risks, and the study of how firms manage these factors/drivers and control their negative effects. The nature of the practices and actions used to manage important risks depends on the characteristics of the companies, their size, resources and the products they outsource.

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Ignoring cultural differences can cause unfavourable situations and negatively influence the success of production internationalization projects. A decision to subcontract part of the production or to produce in a foreign country, requires identifying and controlling the risks related to cultural differences. Our research objective was to study these risks and the business practices used to face them. In order to reach this objective, we studied eight (8) Canadian manufacturing companies, that outsourced part of their production to China. Results show that the risks related to cultural differences, can provoke an important divergence between requirements of the Canadian company and the resulting products manufactured by the Chinese subcontractor and cause an additional unexpected manufacturing cost. The risk of misunderstanding and difficulty communicating in addition to difficulty applying quality control practices were critical for most of the studied companies’ managers. However, the identified risks could be controlled with different business practices, which we classified according to their role of mitigation or contingency. Frequent interaction with Chinese partners, developing a good trust-based relationship with them and finding ways of encouraging them to get more involved in the partnership and to suggest solutions and innovations represent some of the important practices to adopt. JEL classification numbers: M1. Keywords: Cultural differences, Production internationalization, International outsourcing, Outsourcing in China, Risk management, Cross-cultural management.