Offshoring and Outsourcing (original) (raw)
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Economic Modelling, 2013
a b s t r a c t a r t i c l e i n f o This paper examines firms' production strategies for supplying products tailored to the target country's local taste: developing a new localized variety and modifying an existing variety to fit the local taste. Adopting the concept of the flexible technology in industrial organization theory, the paper develops a simple theoretical model to examine when and why exporters or multinationals adopt flexible technologies to serve multiple markets. The results suggest that firms with basic varieties that are considerably different from the variety demanded by the local country are likely to develop localized varieties to serve the country, whereas those with basic varieties that are considerably similar to the demanded variety are likely to modify their existing varieties. In some circumstances, even when foreign production has an intrinsic cost advantage over exporting before the application of a flexible technology, firms may choose to be exporters by adopting the technology. In addition, the results indicate a possible industry equilibrium: Firms with basic varieties that are considerably similar to the variety demanded by the local country are likely to modify them and become multinationals, whereas those with basic varieties that are considerably different from the demanded variety are likely to develop new localized products and become multinationals. Otherwise, firms are likely to modify their existing platforms and become exporters.
COST, VALUE AND FOREIGN MARKET ENTRY MODE: THE TRANSACTION AND THE FIRM
This paper compares and contrasts the mode of foreign market entry decision from the transaction cost/internalization and organizational capability perspectives. Each of these perspectives operates at a different level of analysis, respectively the transaction and the firm, and consequently differs in the primary arena of attention, namely transaction characteristics and the capabilities of firms. In making the comparison, a key distinction is made between the cost and the value aspects in the management of knowhow, based on which issues pertaining to the transfer of knowledge within and across firm boundaries and the exploitation and enhancement of competitive advantage are closely examined. The main purpose of this paper is to demonstrate the implications of a shift in frame from cost to value in the analysis of decisions related to firm boundaries. Entry into foreign markets is used primarily as a vehicle for the accomplishment of this purpose. The paper shows how the value-based framework of the organizational capability perspective radically and fundamentally shifts the approach towards the governance of firm boundaries and argues that, even though TC/internalization theory raises some valid concerns, the organizational capability framework may be more in tune with today's business context. Some of the assumptions of the TC/internalization perspective, both direct---opportunism, exploitation of existing advantage---and indirect---preservation of the value of knowhow across locational contexts, asymmetry between bounded rationality for transaction and production purposes, are critically examined and questioned. Implications of a shift from a cost to a value-based framework are discussed and the need for a shift in research focus is emphasized.
Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, 1998
remaining domestic or engaging in international trade of some form. The second sequential decision involves exporting or FDI. Model regressors include the size of the firm, level of product differentiation, intangible assets, research and development expenditures, long-term debt, capital intensity, the country of origin and business structure. (IDE). La première décision séquentielle est le choix de limite entre le fait de rester domestique ou de s'engager dans un commerce international de quelque forme que ce soit. La deuxième décision séquentielle inclut l'exportation ou l'IDE. Les régresseurs du modèle incluent la taille de l'entreprise, le niveau de différentiation du produit, les actifs incorporels, les dépenses de recherche et développement, la dette à long terme, l'intensité de capital, le pays d'origine et la structure d'affaire.
On the internationalization process of firms: a critical analysis
Journal of International Business Studies, 1993
Even though international marketing has been challenged because of theoretical and methodological shortcomings, very few researchers have actually attempted to analyze the weaknesses based on principles of theory evaluation. In this article, the author examines two types of models addressing the individual rirm's internationalization process. A theory evaluation is performed based on the explanation and the falsification criteria. In order to improve the internationalization models, some measures are proposed.
Transnational companies and production global networks
STUDIES AND SCIENTIFIC RESEARCHES. ECONOMICS EDITION
Internationalizing a company is an objective process. The historical reality shows that, while developing, the company tends to exceed its local, national and regional limits of business environment, in order to expand its activity into the global economic space, whose formatting is possible through the very company’s movement towards exterior. This process is based on the imminent expansionism of the market forces, their tendencies to invade the environment “unmarketedly”, and to include it in an economic system based on the market mechanism. Companies involve themselves in the international production because they have a specific competitive advantage which is best exploited in this way. The advantage can consist in a product or in a brevetted technique, but it may also include management techniques or such as: company’s or its employee’s qualification and expertise.
Problems and Developments in the Core Theory of International Business
Journal of International Business Studies, 1990
The established theory of international business is not without problems. It is necessary to specify the key relationships between internalisation and market structure and between internalisation and competitive advantage more carefully. This paper attempts to clarify the former relationship by reference to the work of Hymer and the latter by contrasting the nature of internalisation decisions with those building shortrun competitive advantage. Avenues of development of the theory include the integration of nontraditional concepts and the reintegration of areas of research that have become divorced from core international business theory. ). However a number of problems remain in this emerging 'core theory.' This paper attempts to elucidate these problems and to suggest avenues of development. ivWo issues of current importance in core internalisation theory are examined-the relationship between internalisation decisions and market structure and between internalisation and competitive advantage. These issues look to be technicalities. In fact, they illustrate some of the key problems that new approaches must confront. *Peter J. Buckley (B.A., M.A., Ph.D) is Professor of Managerial Economics at the University of Bradford Management Centre and Visiting Professor of Economics at the University of Reading and Oslo Business School (Oslo Handelshoyskole), Norway. He is chairman of the U.K. Region of the Academy of International Business and a Fellow of the Academy. He has published widely on the theory and strategy of the multinational firm. I am grateful for the comments of three anonymous referees on a previous draft. These comments have improved the paper in various directions which are not individually noted.
Patterns of internationalisation of corporate technology: location vs. home country advantages1
1999
Given the trends towards increasing globalisation of markets and of production, the globalisation of technology remains a subject of considerable interest to analysts and policy makers in the 1990s. This paper provides some new empirical observations for debate and discussion on the patterns of technological activities of large firms outside their home countries. It is based on a systematic analysis of the US patenting activities of 220 of the most internationalised firms in terms of their Ž technology in the 1990s. Although firms are active outside their home countries in the 'high technology' fields such as . Computers, Pharmaceuticals, Telecommunications, Image and Sound and Materials , quite a sizeable proportion of their foreign activities are concerned with process and machinery technologies. Moreover, a comparison of the technological advantage of the company at home and the advantage of the location shows that in a large majority of cases, firms tend to locate their technology abroad in their core areas where they are strong at home. These results suggest that adapting products and processes and materials to suit foreign markets and providing technical support to off-shore manufacturing plants remain major factors underlying the internationalisation of technology. They are also consistent with the notion that firms are increasingly engaging in small scale activities to monitor and scan new technological developments in centres of excellence in foreign countries within their areas of existing strength. However there is little evidence to suggest that even these most internationalised firms routinely go abroad to compensate for their weakness at home. q 1999 Elsevier Science B.V. All rights reserved.