The recent turbulent global manufacturing environment has resulted in supply chain disruptions and geopolitical conflict crippling the flow of goods, increasing prices and threatening the viability of many offshore manufacturers. As a result, many US manufacturing firms have been taking action to restructure their supply chains. In this study, we use a sample of 189 US firms that made reshoring announcements from 2007 to 2021. We jointly examine the two most consequential sourcing decisions a firm will have to make: the location decision (in terms of reshoring) and the governance modes (make in-house versus buy from a supplier). These decisions are important because they are complex, time-intensive, and will have short- and long-term business implications for organizations. We use Transaction Cost Economics (TCE) and Resource Orchestration Theory (ROT) to illustrate how firm and competitive factors impact the reshoring timeline. Approximately 43.4% of the firms in the sample switched their governance modes, delaying reshoring implementation by 1.43 years.
Using 189 news articles and press releases published from 2007 to 2021 we explore the relationships among competitive factors and firm factors, governance mode switches, and the reshoring timeline using a regression-based survival analysis model.
We find that 43.4%of firms that reshore manufacturing also switch their governance mode. When controlling firm characteristics, governance mode switches are associated with approximately 58.6%longer reshoring duration requiring an average of 1.43 additional years to becoming operational compared to firms that maintained the same governance mode.
The study’s findings rely on a specific sample of US manufacturing firms found using secondary sources, limiting our sample size. Our sample may be less generalizable to firms in different geographical contexts.
This research provides novel empirical insights into the interplay between reshoring, governance mode decisions, and operational reshoring lead times. By bridging TCE and ROT, we contribute by empirically testing the relationships between governance mode and reshoring timelines. Using these insights, we offer actionable strategies and policy recommendations for firms and governments navigating reshoring initiatives.
