Prior to reshoring: A duration analysis of foreign manufacturing ventures

This paper throws light on the determinants of the duration of manufacturing offshore experiences by US and European firms prior to reshoring. By applying survival analysis to a dataset of 249 offshoring experiences terminated with a relocation to the home country/region, we estimate the effects of different groups of survival determinants. Results highlight that contextual factors such as the industry, the home country, the host country, and the size of the firm significantly affect the duration of offshoring experiences. The likelihood of termination is in fact higher for the electronics and automotive industries, for small firms, for firms headquartered in Europe, and for offshoring to Asia. The analysis of the motivations for reshoring shows that quality issues experienced offshore emerge as the key factor giving rise to shorter offshore stays. Based on these empirical findings, a set of testable propositions is developed. In particular, we conjecture that the likelihood of termination of offshore manufacturing and the return to the home country may be accelerated by technology-based industries, small firm sizes, shrinking cost differentials and the psychic distance between home and host country, the organizational archetypes, and quality related motivations.

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