Captive Offshoring of New Product Development in Brazil

Dirk M. Boehe ()
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Dirk M. Boehe: Insper Institute of Education and Research

Management International Review, 2010, vol. 50, issue 6, No 4, 747-773

Abstract: Abstract This paper focuses on captive offshoring of new product development (NPD), i.e., relocating projects or project phases to foreign-based, wholly-owned, multinational corporation (MNC) subsidiaries (captive offshore units) to benefit from cost and efficiency advantages and/or from access to complementary technological resources and capabilities. Adopting a host country perspective, we theorize why different forms of local collaboration may complement or conflict with efficiency-seeking or arbitrage strategies and may thus influence why captive offshore units receive new product development orders from other MNC units located abroad. Using a sample from Brazil and applying structural equation modeling with partial least squares (PLS), we find that local NPD outsourcing constitutes a complementary relationship, while local cooperation with clients creates a trade-off relationship with captive offshoring. That these relationships are moderated by the captive offshore unit’s cost position within the MNC suggests that arbitrage effects transcend the headquarter-subsidiary relationship into the sphere of MNC subsidiaries’ local collaborations. Our findings imply that arbitrage in multinational contexts affects the interdependence between resources and transaction costs.

Keywords: Multinational corporations; Subsidiaries; Emerging economies; Offshoring; Outsourcing; Arbitrage; Brazil (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s11575-010-0054-z

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