The purpose of this paper is to integrate sustainability and economic factors into a framework for understanding the reshoring decision.
This paper integrates sustainability and economic factors into a reshoring framework through using the theoretical perspectives of the natural resource-based view (NRBV) and transaction cost economics (TCE), and carrying out case study research with a number of firms involved in reshoring in the German automotive industry.
Through adopting a multi-theory approach, the framework captures the complexities of the reshoring decision and illustrates that reshoring is not a location decision alone, but encompasses a range of sourcing options such as local production in-house, using a local supplier or addressing sustainability problems with the offshore operation. The importance of sustainability capability development as a basis of extending the range of reshoring sourcing options available is highlighted.
Using the NRBV has allowed to develop value creating drivers in the context of reshoring. Integrating the logic of TCE with this analysis provided an understanding of how cost reducing drivers were present alongside the value creating drivers for reshoring at the case companies. Beyond previous frameworks integrating the RBV and TCE, bringing in the NRBV allowed us to highlight the importance of sustainability capability development as a basis of extending the range of reshoring sourcing options available. While this study’s cases were in the automotive industry in Germany, future research could sample for further geographies and industries to cover varying regulatory pressures for sustainability as well as sustainability-related industry initiatives.
The framework can provide guidance to managers on the conditions that favour the selection of each sourcing option when making the reshoring decision.
Although there are frameworks in the literature that explain the reshoring decision, limited attention has been given to integrating sustainability issues into the analysis. The findings here contribute important insights into the complementary and contradictory prescriptions of the NRBV and TCE in reshoring decisions, and several propositions are offered outlining these relationships. The resulting framework provides an integrated approach for managerial decision-making beyond economic factors alone.
