Revised Model and Its Implications

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Content Analysis – Categorization and Synthesis

As the field of reshoring is so narrow, the authors had to adjust Mayring’s approach according to the particular needs of this review. Firstly, articles were scanned for a definition of the term ‘reshoring’. This step was necessary to ensure that articles actually dealt with the same issue, since terms addressing the same phenomenon (such as back-shoring) differ. Even though they use different terms, a similar understanding of reshoring could be confirmed. Secondly, all papers were sorted according to their theoretical argumentation. Through this step, several theories to ground reshoring could be identified, e.g. Transaction Cost Economics (TCE), the Resource Based View (RBV) and the Ownership advantages, Location advantages, and Internalization advantages model (OLI). Thirdly, as drivers and barriers for reshoring are of particular importance to this thesis, categorization subsequently focused on identifying articles which mentioned either drivers or barriers for the reshoring phenomenon. Articles on reshoring which did not contain any of the former were sorted in a separate group. These would only serve to frame the wider field of reshoring mentioned above. From the primary group of articles, drivers and barriers were systematically extracted in order to identify different types and their frequency / prioritization of being mentioned by the different authors. Following this round and to clarify the findings, papers were cross-examined to identify those which only repeated others and those which actually added new knowledge. Finally, all articles’ contributions and implications were discussed before the review was concluded.

Reshoring: Theoretical Perspectives

Even though the evidence for reshoring is limited, the topic has provoked debates in several countries (Bailey & De Propris, 2014b). To explain the issue scientists have borrowed knowledge from different existing theories in order to build a theoretical foundation. Many approaches refer for example to TCE, RBV or the OLI model, which is outlined below. Consequently, the academic discussion has developed along different paths aligned within these theories (Bailey & De Propris, 2014b). Most often reshoring is either described (a) as a location and cost-related choice borrowing from internalization theory (e.g. Ellram, Tate & Petersen, 2013, Gray et al., 2013) or (b) as a phenomenon caused by diminishing cost advantages, volatile demand and smaller / segmented markets (e.g. Wu & Zhang, 2014), or (c) as an occurrence primarily concerned with network management and ownership issues (e.g. Martínez-Mora & Merino, 2014). Moreover, there are other theories from International Business literature such as foreign divestment and de-internationalization theory. These concepts usually cannot sufficiently describe reshoring as they often either exclude key features of the phenomenon or, in the case of divestment literature, only describe the repatriation of whole plants.

Reshoring: Why Do Firms Reshore?

Dynamics in making the manufacturing relocation decision (overview in figure 3.7) The body of literature evaluates the reshoring decision mostly from a ‘why’ perspective. Within that process some barriers to reshoring can be identified (mostly when relative comparisons are made), but most articles focus on what drives firms to make the reshoring decision despite the locational advantage of having low labor costs at the offshoring location. Figure 3.7 lists the most important dynamics. The factors in the figure have been derived from the articles that are included in the systematic literature review and are all perceived to impact decision making processes leading to the final reshoring decision. The following assumptions / principles are important for the logic behind the structuration of dynamics in the figure: – Generally, offshoring results in business operations being dispersed. This dispersion has negative aspects which must be outweighed by location specific factors at the offshoring location. If this is not the case, reshoring is more likely to happen. – The decision to reshore is always a result of changes in the status quo (which is here, having manufacturing processes at an offshoring location up and running). Therefore changes in various aspects which are relevant to financial performance have to be reviewed. – Within dispersed manufacturing operations these changes can be allocated to specific areas; external (in home or host country), in between (supply chain) or internally (firm-specific). – The current reshoring trend applies to firms that have their demand markets at the home base or at relative close proximity to the home base (if this does not apply, logic demands that for most industries the case for reshoring becomes less relevant). – Essentially, a cause/effect approach has been applied; the effect (reshoring) is caused by a wide variety of elements (i.e. changes in factors that led to the initial offshoring decision, and others) in different areas. Once the combined ‘value’ of this variables is in favor of production at the home base, then manufacturing is inclined to move back to the home base.

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Research by Svenskt Näringsliv

Since 2005 the association of Swedish businesses, Svenskt Näringsliv, has quarterly collected data from its members through its ‘företagarpanel’ (Svenskt Näringsliv, 2013). The onlinebased survey obtains data from approximately 9,000 companies in Sweden and regularly achieves response rates of 50 percent. In one of the more recent surveys (June 2013), Näringsliv included standardized questions on firms’ reshoring experience (Svenskt Näringsliv, 2013). The raw data from the survey was obtained from Näringsliv by the authors of this thesis (Appendix 31 ) and has been used as an introduction to the more specific case study results by giving insight on the general view of the Swedish industry on reshoring. Out of the companies with international operations, 74 firms indicated to have reshored production activities back to Sweden. As this research is exclusively focused on the reshoring of production to Sweden, the authors of this thesis only considered the answers from manufacturing firms (‘varuproduktion / tillverkning’) on why they either (a) did reshore operations or (b) plan to move activities home.

Case Analysis Company A

The reshoring effort at Company A consisted of the repatriation of one product from China. Thus, the impact on overall production was relatively small. It seems that the ownership mode of the plant in China affected the ease of reshoring positively. As the Chinese plant is wholly owned by Company A / Group A there were no contractual barriers and it appeared that decision making on reshoring itself and the subsequent execution processes were not impeded in any way. Looking at the case from a more theoretical perspective, the theory of Transaction Cost Economics (TCE) serves well as an underlying context. TCE is widely used for make-or-buy decisions and suggests that individual firms will move from high cost to low cost environments / regions if all else stays equal (Ellram, 2013). This ‘natural flow’ will, for example, be slowed down by cultural differences or limited intellectual property protection rights which creates room for opportunism and makes some low cost countries less attractive (McIvor, 2013). The case experiences from Company A to a large extent match with the claims of TCE. The company offshored and outsourced parts of the production process to a low cost country following the reasoning of TCE. Even though this might have happened for additional reasons, one of the main drivers was always the promise of cost reduction. After a few general observations from the case, the analysis continues along the dynamics mentioned in the framework introduced in the literature review (3.2.4). The reshoring decision is considered from five angles: global competitive dynamics, host and home country factors as well as supply chain related and firm-specific aspects.

Contents :

  • 1 Introduction
    • 1.1 Background
    • 1.2 Problem Statement
    • 1.3 Purpose and Research Questions
    • 1.4 Delimitations
  • 2 Methodology
    • 2.1 Research Philosophy
    • 2.2 Research Approach
    • 2.3 Systematic Literature Review
      • 2.3.1 Research Strategy
      • 2.3.2 Data Collection
      • 2.3.3 Data Analysis
    • 2.4 Case Studies
      • 2.4.1 Research Strategy
      • 2.4.2 Data Collection
      • 2.4.3 Data Analysis Procedures
      • 2.4.4 Documentary Secondary Data
    • 2.5 Research Quality
    • 2.5.1 Systematic Literature Review
    • 2.5.2 Case Studies
  • 3 Frame of Reference
    • 3.1 Descriptive Analysis
      • 3.1.1 Publication Details
      • 3.1.2 Applied Research Strategies
      • 3.2 Content Analysis – Categorization and Synthesis
      • 3.2.1 Reshoring: A Definition
      • 3.2.2 Reshoring: Theoretical Perspectives
      • 3.2.3 Reshoring: Decision Making Frameworks
      • 3.2.4 Reshoring: Why Do Firms Reshore?
      • 3.2.5 Reshoring: When, Where and How Do Firms Reshore?
      • 3.2.6 Reshoring: Consequences, Conclusions and Development
      • 3.2.7 Summary and Concluding Thoughts
  • 4 Empirical Findings
    • 4.1 Research by Svenskt Näringsliv
    • 4.2 Findings Company A
    • 4.3 Findings Company B
    • 4.4 Findings Company C
    • 4.5 Findings Company D
    • 4.6 Findings Company E
  • 5 Analysis
    • 5.1 In Case Comparison of Theory and Empirical Findings
      • 5.1.1 Case Analysis Company A
      • 5.1.2 Case Analysis Company B
      • 5.1.3 Case Analysis Company C
      • 5.1.4 Case Analysis Company D
      • 5.1.5 Case Analysis Company E
    • 5.2 Revising the Model for Sweden – Cross Case Analysis
      • 5.2.1 General Case Comparison
      • 5.2.2 Motivational Factor Analysis
    • 5.3 Revised Model and Its Implications
      • 5.3.1 Theoretical Implications of the Revised Model
      • 5.3.2 Implications for Further Reshoring Developments
  • 6 Conclusion and Suggestions for Further Research
    • 6.1 Conclusion
    • 6.2 Suggestions for Further Research
  • 7 References
    • 7.1 References Articles Systematic Literature Review
    • 7.2 Other References
  • 8 Appendices
    • 8.1 Appendix 1: Results Literature Search
    • 8.2 Appendix 2: Interview Guideline
    • 8.3 Appendix 3: Svenskt Närlingsliv Data
    • 8.4 Appendix 4: Firm descriptions

The Reshoring Conundrum Why manufacturing companies move production back to Sweden

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