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    Linking production geography and financial performance

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    Publication type
    Vlerick strategic journal article
    Author
    von Dzengelevski, Oliver
    Netland, Torbjørn H.
    Vereecke, Ann
    Ferdows, Kasra
    Publication Year
    2023
    Journal
    International Journal of Operations and Production Management
    
    Metadata
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    Abstract
    Purpose – When is manufacturing in high-cost environments and more profitable for multinational manufacturers and when in low-cost environments? While the literature offers many cues to answer this question, too little empirical research directly addresses this. In this study, we quantitatively and empirically investigate the financial effect of companies’ production footprint in low-cost and high-cost environments for different types of production networks. Design/methodology/approach – Using the data of 770 multinational manufacturing companies, we analyze the relationship between production footprints and profitability during four calendar semesters in 2018 and 2019 (N 5 2,940), investigating the moderating role of companies’ production network type. Findings – We find that companies with networks distinguished by both high levels of product complexity and process sophistication profit the most from producing to a greater extent in high-cost countries. For these companies, shifting production to low-cost countries would be associated with negative performance implications. Practical implications – Our findings suggest that the production geography of companies should be attuned to their network type, as defined by the companies’ process sophistication and product complexity. Manufacturing in low-cost countries is not always the best choice, as doing so can adversely affect profits if the products are highly innovative and the production processes are complex. Originality/value – We contribute to the scarce empirical literature on managing global production networks and provide a data-driven analysis that contributes to answering some of the enduring questions in this critical area
    Keyword
    Production Networks, Foreign Direct Investment, Product Complexity, Process Sophistication, Reshoring
    Knowledge Domain/Industry
    Operations & Supply Chain Management
    DOI
    10.1108/IJOPM-11-2022-0762
    URI
    http://hdl.handle.net/20.500.12127/7256
    ae974a485f413a2113503eed53cd6c53
    10.1108/IJOPM-11-2022-0762
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