Why Firms Relocate Their Production Overseas? The Answer Lies Inside: Corporate, Logistic and Technological Determinants

Abstract

The paper analyses the drivers of international production relocation using a model built on intra-corporate factors. The results of an empirical research on an original and thorough data base for the Spanish automobile parts sector over the period 2001-2008 show the impact of corporate restructuring strategies on flexibility for transferring resources overseas. In particular, the larger the number of alternative plants in other countries, the greater the operational flexibility and, therefore, the more likely relocation will be. Second, lean supply requirements and technological complexity in the product or process at production plant level are both serious barriers to mobility. Finally, our results confirm that sunk costs are irrelevant in comparison with corporate factors.

Keywords: International production relocation, corporate strategy, lean supply, technology.

JEL Classification: F2, F23, L2, L23