The Outsourcing Strategy of Local and Multinational Firms: A Supply Base Perspective

Michael J. Mol, Chris Brewster

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Firms outsource through connecting to local and global supply bases and making such connections produces costs of search and evaluation, which are a function of transaction characteristics and firm capabilities. We argue that firms outsource more when those costs are low. Hence, domestic subsidiaries of multinational firms, with low cost access to both local and global supply bases, outsource more than either domestic firms or foreign subsidiaries, as confirmed by evidence from a large data panel. We also propose that among foreign subsidiaries, distance from the home country co-determines search and evaluation costs such that subsidiaries from more distant countries outsource less. This is confirmed for geographic distance, but a positive effect is found for political distance and a mixed effect for cultural distance.
Original languageEnglish
JournalGlobal Strategy Journal
Volume4
Issue number1
Pages (from-to)20-34
ISSN2042-5791
DOIs
Publication statusPublished - Feb 2014
Externally publishedYes

Keywords

  • Outsourcing
  • Cultural Distance
  • Political Distance
  • Geographic Distance
  • Subsidiaries

Cite this

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abstract = "Firms outsource through connecting to local and global supply bases and making such connections produces costs of search and evaluation, which are a function of transaction characteristics and firm capabilities. We argue that firms outsource more when those costs are low. Hence, domestic subsidiaries of multinational firms, with low cost access to both local and global supply bases, outsource more than either domestic firms or foreign subsidiaries, as confirmed by evidence from a large data panel. We also propose that among foreign subsidiaries, distance from the home country co-determines search and evaluation costs such that subsidiaries from more distant countries outsource less. This is confirmed for geographic distance, but a positive effect is found for political distance and a mixed effect for cultural distance.",
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The Outsourcing Strategy of Local and Multinational Firms : A Supply Base Perspective. / Mol, Michael J.; Brewster, Chris.

In: Global Strategy Journal, Vol. 4, No. 1, 02.2014, p. 20-34.

Research output: Contribution to journalJournal articleResearchpeer-review

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T2 - A Supply Base Perspective

AU - Mol, Michael J.

AU - Brewster, Chris

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AB - Firms outsource through connecting to local and global supply bases and making such connections produces costs of search and evaluation, which are a function of transaction characteristics and firm capabilities. We argue that firms outsource more when those costs are low. Hence, domestic subsidiaries of multinational firms, with low cost access to both local and global supply bases, outsource more than either domestic firms or foreign subsidiaries, as confirmed by evidence from a large data panel. We also propose that among foreign subsidiaries, distance from the home country co-determines search and evaluation costs such that subsidiaries from more distant countries outsource less. This is confirmed for geographic distance, but a positive effect is found for political distance and a mixed effect for cultural distance.

KW - Outsourcing

KW - Cultural Distance

KW - Political Distance

KW - Geographic Distance

KW - Subsidiaries

U2 - 10.1111/j.2042-5805.2013.01070.x

DO - 10.1111/j.2042-5805.2013.01070.x

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EP - 34

JO - Global Strategy Journal

JF - Global Strategy Journal

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