Relocation of second degree: Moving towards a new place or returning home?

Published on Jun 1, 2019in Journal of Purchasing and Supply Management
· DOI :10.1016/J.PURSUP.2018.12.003
Paolo Barbieri13
Estimated H-index: 13
(UNIBO: University of Bologna),
Stefano Elia20
Estimated H-index: 20
(Polytechnic University of Milan)
+ 1 AuthorsRuggero Golini18
Estimated H-index: 18
(University of Bergamo)
Sources
Abstract
Abstract We study the “Relocations of Second Degree” (RSDs), i.e., the location decisions that modify the country of destination of a previous offshoring investment. Specifically, we distinguish between two types of RSDs, i.e., “Relocation to the Home Country (RHC)”, also known as back-reshoring, and “Relocation to a Third Country (RTC)”, i.e., the choice to move to a second host country. Specifically, we explore how the location advantages underlying the previous offshoring decision affect the probability to undertake an RHC, rather than an RTC. Location advantages reflect the favourable conditions that a foreign country offers with respect to the home one, in terms of market-seeking, asset-seeking and efficiency-seeking (i.e., cost-saving and productivity-enhancing) opportunities. Using data from the European Restructuring Monitor, we focus on the RSDs regarding manufacturing activities, implemented across European countries between 2002 and 2015. We find that, on the one hand, when a previous offshoring investment is driven by market-seeking location advantage, firms undertaking the RSD are more likely to opt for an RHC, except during the economic crisis where market-seeking European firms seem to prefer RTCs. On the other hand, RTC is a preferred choice when the location advantage is of efficiency-seeking type. In addition to offering a broader characterization of RSDs, our study provides empirical evidence of the relationship between the offshoring and relocation decisions. Managers should be aware of this connection when designing their manufacturing internationalization strategies.
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