Does offshoring create value for shareholders?

Abstract

a b s t r a c tWe study the wealth effect of offshoring by analyzing the announcement-period returns as well as the longrun operating and stock return performance of firms that offshored their activities in the period 2000-2005. Announcement-period stock returns are positive for firms that offshore activities primarily to reduce costs but are negative for firms that offshore activities for other reasons. Also, announcement-period stock returns are higher for firms with a larger size, better operating performance, lower growth potential, and a higher cost of goods sold in the year prior to the offshoring announcement. Firms that offshore activities primarily to reduce costs enjoy improved operating and stock return performance in the years following the offshoring. Overall, our findings indicate that not all firms enjoy the benefits of offshoring; rather, only those that offshore primarily to reduce costs do.

Are Reshoring Decisions Influenced by External Stakeholders and Country‐Level Environmental Regulation?

“…foreign directors) to the host‐country context, the institutional environment can shape the preference for specific choices that are made in such a way that the negative impact of institutions on firm‐level outcomes is minimized. This is in line with existing studies showing how the way in which subsidiaries are organized can minimize the costs MNEs face when dealing with uncertain institutional environments (Prezas, Simonyan and Vasudevan, 2010; Srai and Ané, 2016; Surroca, Tribó and Zahra, 2013; Uhlenbruck, 2004). We made a further step in considering the implications of corporate governance institutions (i.e.…”

“…Indeed, poor protection of minority shareholders could undermine the authority of MNEs (Schneper and Guillén, 2004) and affect the subsidiary's internal strategic decisions in such a way that the interests of the foreign investor are not protected (Carruthers and Ariovich, 2004). Further, minority shareholders’ protection facilitates the bargaining power of MNEs and leverages resource allocation (Casson, 2013; Grappi, Romani and Bagozzi, 2015; Prezas, Simonyan and Vasudevan, 2010). In addition, majority shareholders require minority shareholders’ consent for contentious issues, such as labour‐cost arbitrage, in compliance with the country's industrial policy framework, where labour‐cost arbitrage is often seen as a strategic intent of firms to reshore (Butzbach, Fuller and Schnyder, 2020).…”

Offshoring experience and performance: the role of realized drivers and risk management

“…Various performance indicators have been studied, including: cost efficiency (Jiang et al , 2006); productivity (Fariñas et al , 2014; Michel and Rycx, 2014; Caniato et al , 2015); flexibility (Scherrer-Rathje et al , 2014); innovation performance (Nieto and Rodríguez, 2011); competitiveness (Cerruti, 2008; Mohiuddin and Su, 2013); commercial and financial performance (e.g. sales growth, market share, profitability) (Kotabe and Mol, 2009; Salimath et al , 2008; Ceci and Masciarelli, 2010; Oke and Kach, 2012; Sanchís-Pedregosa and Palacín-Sánchez, 2014); and shareholder value (Prezas et al , 2010). …”

“…However, the findings on the performance effects of offshoring are inconclusive. The majority of existing studies report positive performance effects of offshore outsourcing (Cerruti, 2008; Ceci and Masciarelli, 2010; Prezas et al , 2010; Mohiuddin and Su, 2013; Fariñas et al , 2014; Michel and Rycx, 2014; Scherrer-Rathje et al , 2014) and captive offshoring and outsourcing (Nieto and Rodríguez, 2011). Some studies, though, report both positive and negative effects of outsourcing (Yu and Lindsay, 2011).…”

La tercerización y el rendimiento financiero: muestra de empresas estadounidenses, 2000-2009

“…Los estudios empíricos congruentes con este tema presentan resultados mixtos y los trabajos anteriores son descriptivos, los cuales emplean estudios de caso o consideran los cambios de valor de acciones comunes de las empresas que tercerizan utilizando estudios de eventos. En algunos casos, se observan efectos positivos (Prezas, Simonyan y Vasudevan, 2010;Agrawal et al, 2010;Naru & Truitt, 2013;Ikerionwu et al, 2014) y en otros, se indica que las empresas que tercerizan no han logrado mejorías en el desempeño financiero después de la tercerización (Gilley y Rasheed, 2000;Görg y Hanley, 2004;Manning, Levin y Schuerch, 2011y Jensen y Pedersen, 2012. El presente artículo utiliza las cuentas de los estados financieros para las empresas que tercerizan para medir la relación entre la tercerización y el rendimiento financiero.…”