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Choosing multiple offshoring strategies: Determinants and complementarity

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  • Cho, Janghee
  • Chun, Hyunbae
  • Hur, Jung

Abstract

In contrast to the existing offshoring literature that typically views foreign outsourcing and integration as alternative strategies, the simultaneous use of these two offshoring strategies by multinational firms becomes common practice in many countries. In this paper, we employ bivariate choice models to investigate firm-level decision-making on foreign outsourcing and insourcing strategies. Analyzing Korean firm-level data, we find a possible complementarity between the two strategies and that a firm’s choice of multiple sourcing strategies is related to its expected gains from increased bargaining power, reduced price risk in purchasing inputs, and costs saved in the production process. Furthermore, our empirical results reveal distinctive roles of various firm-specific characteristics in determining the two foreign sourcing strategies adopted by Korean manufacturing firms.

Suggested Citation

  • Cho, Janghee & Chun, Hyunbae & Hur, Jung, 2014. "Choosing multiple offshoring strategies: Determinants and complementarity," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 42-57.
    • Handle: RePEc:eee:jjieco:v:34:y:2014:i:c:p:42-57
    DOI: 10.1016/j.jjie.2014.04.002
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    Cited by:

    1. Hyunbae Chun & Jung Hur & Young Gak Kim & Hyeog Ug Kwon, 2017. "Cross-border Vertical Integration and Intra-firm Trade: New Evidence from Korean and Japanese Firm-level Data," Asian Economic Papers, MIT Press, vol. 16(2), pages 126-139, Summer.
    2. Nyeong Seon Son & Jung Hur, 2022. "An empirical study of firm productivity growth based on the dynamic selection model: Effects on the recent decline in Korean exports," Contemporary Economic Policy, Western Economic Association International, vol. 40(1), pages 190-203, January.
    3. Jan Stentoft & Jan Olhager & Jussi Heikkilä & Lisa Thoms, 2016. "Manufacturing backshoring: a systematic literature review," Operations Management Research, Springer, vol. 9(3), pages 53-61, December.

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    More about this item

    Keywords

    Offshoring; Outsourcing; Insourcing; Complementarity; Bivariate probit model;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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