Offshoring as a Survival Strategy in Globalizing Industries: New Evidence from Belgian Manufacturing

K. Coucke and Leo Sleuwaegen

Vlerick Leuven Gent Management School Working Paper Series from Vlerick Leuven Gent Management School

Abstract: This paper analyzes the impact of globalization on the exit behavior of manufacturing firms in one of the world’s most open economies: Belgium. We find that imports from low-wage countries exert a strong competitive effect that lowers a firm’s chances of survival. This competitive effect is found to arise mainly in industries where intra-industry trade, an indicator of product differentiation, is relatively low. As an offensive strategy to cope with the rising competitive pressure from imports, we find that firms exploiting opportunities afforded by globalization, in particular the off-shoring of activities, are able to improve their chances of survival. Making a distinction between domestic firms and subsidiaries of multinational firms, we also find that domestic firms face a higher risk of exit when multinational firms compete in their relevant input and output markets. Finally, we show that subsidiaries of multinational firms are better adapted to cope with globalization forces, and we find them to be less sensitive to domestic market conditions in the host country.

Keywords: Exit; Off-shoring; Sourcing; Globalization (search for similar items in EconPapers)
JEL-codes: F1 F23 L2 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2007-04-23
New Economics Papers: this item is included in nep-bec, nep-cse, nep-ent and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:vlg:vlgwps:2007-13

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