The reshoring of business services: Reaction to failure or persistent strategy?

Abstract

This paper investigates whether reshoring of business services is the result of company response to performance shortcomings of the initiative offshored or instead is motivated by persisting with original offshoring strategy (disintegration advantages, accessing new markets and costsaving), regardless of offshoring performance. Our empirical analysis, based on data from the Offshoring Research Network, shows that both arguments hold. Moreover, when offshoring had been motivated by accessing to new markets and its performance is unsatisfactory, companies are likely to relocate. However, unsatisfactory performance of activities offshored for efficiency reasons or search of talent, do not necessarily lead companies to relocate elsewhere.

The global recession and the shift to re-shoring: Myth or reality?

“…Interestingly, industries such as apparel and textile manufacturing also make up around 12 percent of the cases, suggesting that low tech activity is also being re-shored. Albertoni et al (2017) explore this phenomenon in the context of business services, highlighting the extent to which skill shortages in the west may hinder this. The general strategic decision to re-shore depends on the type of product, service or component that is under consideration, ranging from relatively low cost products and services to high value-added items.…”

“…There is no formal, universally accepted definition of re-shoring, though it is widely recognised to be the practice of bringing activity that had previously been located abroad back to the home country or region. Albertoni et al (2017) refer to reshoring to mean "the voluntary (i.e. not forced by host country governments) partial or total relocation of business initiatives previously offshored, whether to another location or back home", although the subsequently only focus on the service sector.…”

Backshoring and nearshoring: An overview

“…Similarly, worse environmental and workforce conditions in destination countries may not be acceptable for Westernised societies in the home countries and may damage the reputation of the offshored firms (Gray et al, ; Tate, ). Country and exchange risks in destination countries may negatively affect the feasibility of offshoring, especially in countries with weak institutional and political environments (Albertoni, Elia, Massini, & Piscitello, ; Stanczyk et al, ), as well as differences in certification processes. There are also asymmetries such as cultural differences (e.g., differences in vacation periods and supplier–customer communicative barriers) that may disrupt production schemes and deliveries to home countries (Gray et al, ; Tate, ).…”

“…Despite the huge potential implications of backshoring and nearshoring, up to now public policies have not played a major role in shaping firms' decisions to backshore (Lee, ), which suggests that further efforts are still needed in developed countries (Albertoni et al, ). Among them, it is important to highlight how public opinion in developed countries is increasingly ready to pay a premium prize for locally manufactured products (Barbieri et al, ), a circumstance partially explained by the role of “Made in” effect as one of major determinants for backshoring decisions.…”

Global sourcing, productivity and export intensity

“…Following previous literature (e.g., Albertoni et al, 2017;Crinò, 2009;Grossman & Rossi-Hansberg, 2006;Hijzen et al, 2010;Olsen, 2006), import of intermediate inputs is used to proxy for offshoring without distinguishing whether the foreign supplier is external or affiliated with the firm. Hence, offshoring is defined as relocation of firms' activity abroad either as offshore captive (i.e., activities remain within the boundary of the firm) or offshore outsourcing (activities are moved outside the firm).…”