From China to the West: why manufacturing locates in developed countries

Abstract

This article analyses the competitive priorities underlying manufacturing location initiatives in developed economies. Specifically, building on secondary data, we compare and contrast manufacturing backshoring from China by companies headquartered in developed economies (308 cases) and Chinese foreign direct investment to developed economies (155 cases). Results suggest that both types of initiatives share some common priorities, such as exploiting the ‘country of origin’ effect and innovation opportunities in developed countries. At the same time, results highlight differences that may be attributed to the home country of the firm. In particular, cost priorities appear to be more important for Chinese companies than for backshoring ones. Findings offer insight into why manufacturing in developed economies may expand as a result of both repatriations and of foreign direct investments from emerging economies such as China, and point to potential areas of policy intervention.

KEYWORDS:

• Backshoring
• OFDI
• manufacturing in high-cost environments
• competitive priorities
• location decision
• China

Acknowledgement

A previous version of this research has been included in the doctoral dissertation ‘Intermediation and manufacturing location decisions: achieving advantages from distant countries’ (Virtanen 2020).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Alessandro Ancarani

Alessandro Ancarani, Ph.D., MEng (with BSc), is Full Professor in Management Engineering, University of Catania (Italy). He is Editor in chief of the Journal of Public Procurement. He was Editor in chief of the Journal of Purchasing and Supply Management from 2010 to 2015. He was President of IPSERA in the period 2009-2012 and founder member of EDSI in 2010. His research interests are in public procurement, adoption of technology Industry 4.0 and IoT, analysis of intangibles in public service organizations, suppliers’ performances evaluation, behavioural operations, reshoring of manufacturing. He has published in leading journals as British Journal of Management, International Journal of Production Economics, International Journal of Production & Operations Management, Social Science & Medicine, European Journal of Operational Research, International Journal of Production Research, and Journal of World Business.

Carmela Di Mauro

Carmela Di Mauro received her D.Phil. degree in economics. She is an Associate Professor in management engineering with the University of Catania. She has authored or co-authored more than 25 articles in Scopus-indexed journals, and is currently involved in research projects on the reshoring of manufacturing and the role of human behaviour in operations management. Her research has won awards both at home and internationally. She is an Associate Editor for the Journal of Purchasing and Supply Management, and a member of the Board of Directors of the Decision Sciences Institute (2018–2020).

Yuan Virtanen

Yuan Virtanen is a doctoral researcher at Aalto University School of Business. Her research interests include role of intermediaries in global sourcing and manufacturing location decisions.

Weimu You

Weimu You is Lecturer in Sustainability and Global Value Chains at Brunel Business School, Brunel University London, UK. Weimu holds a PhD in Economics and Business Administration with a specialisation in Supply Chain Management and International Business from Aalto University School of Business, Finland, where he also received a Master’s degree in Information Systems Science. Prior to joining Brunel, Weimu worked as a Postdoctoral Researcher and Teaching Assistant at Aalto University. His work has been published in internationally peer-reviewed academic journals such as Critical Perspectives on International Business, International Journal of Management Reviews, Journal of Cleaner Production and Technological Forecasting and Social Change.