Diagonal cumulation of origin as an institutional incentive mechanism for cost optimisation in contemporary international business
M. Jurše (milan.jurse@uni-mb.si),
K. Logožar (klavdij.logozar@uni-mb.si),
M. Ključevšek (matjaz.kljucevsek@gorenje.si) and
R. Korez-Vide (romana.korez-vide@uni-mb.si)
Additional contact information
M. Jurše: University of Maribor, Faculty of Economics and Business, Razlagova 14-20, 2000 Maribor, Slovenia
K. Logožar: Business Logistics and International Economics, University of Maribor, Faculty of Economics and Business, the Department of International Trade in Goods and Services, Maribor, Slovenia
M. Ključevšek: Gorenje d.d., Slovenia
R. Korez-Vide: University of Maribor, Faculty of Economics and Business, Department of International Trade in Goods and Services, Maribor, Slovenia
Acta Oeconomica, 2011, vol. 61, issue 2, 165-191
Abstract:
In the emerging process of market globalisation, firms’ strategic options for optimising their cross-border operations have broadened. This paper presents a strategic framework for developing an appropriate strategic response of firms by relocating their production facilities and framing their operational procedures in such a way that they may, as eligible beneficiaries, exploit institutional incentive mechanisms available in a specific region or a host country. More specifically, in the paper we explore a strategic option for lowering firms’ operational costs through international operations by using the mechanism of diagonal cumulation of origin introduced by the European Union (EU) in its Common Commercial Policy towards selected non-member countries. Despite extensive discussions in theoretical literature on the conception of the rules of origin, only a few studies have explored the implications of this mechanism from the perspective of a firm’s transaction costs in international business. This paper shows that the ‘SAP+ diagonal cumulation of origin,’ when properly conceived and implemented by a firm, can positively affect its financial performance. By analysing the cost-effect simulation of a selected household appliance producer in the presented case study, we then discuss the key strategic and operational implications for firms wishing to take advantage of offered supranational institutional incentive mechanisms.
Keywords: diagonal cumulation of origin; international business operations; institutional incentives; cost optimisation; supply-chain management; business performance (search for similar items in EconPapers)
JEL-codes: D21 F13 F15 F23 F55 (search for similar items in EconPapers)
Date: 2011
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