An empirical analysis of manufacturing competitive factors and offshoring

Offshoring is one of the defining phenomena of 21st century manufacturing. It attracts significant attention in academic, business, and social circles in both developed and developing economies. Despite the relevance of this phenomenon, there is limited research exploring to what extent offshoring effort is explained by manufacturing strategy. In this study I investigate whether offshoring effort can be predicted by manufacturing competitive factors such as cost, flexibility, and delivery, particularly when controlling for structural covariates from internalization theory. Data from an international manufacturing survey enable the analysis. Results suggest that competing based on cost and flexibility, but not on delivery, explains the effort to relocate sourcing and design activities to a foreign country.