Skip to main content
SpringerLink
Log in

A Taxonomy of Sourcing Strategic Types for MNCs Operating in China

  • Published:
Asia Pacific Journal of Management Aims and scope Submit manuscript

Abstract

This paper presents a taxonomic study of sourcing strategy types and their relationships to subsidiary profitability. Using the taxonomic approach, this study identifies five sourcing strategy types based on the decision rules of direction and volume of sourcing activities, namely market access, offshore platform, offshore manufacturing, local sourcing, and complex sourcing. We validated these sourcing types by linking them to a set of business and investment strategic factors. Based on a sample of 319 foreign subsidiaries in China, the results confirm the taxonomy of sourcing types indicating that sourcing strategy types indeed vary along the strategic factors including wage rates, R&D intensity, subsidiary size, capital commitment, ownership control and partner type.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Anderson, E. and H. Gatignon. (1986).“Modes of Foreign Entry: A Transaction Cost Analysis and Propositions.” Journal of International Business Studies17, 1–26.

    Google Scholar 

  • Bartlett, C.A. and S. Ghoshal. (1986).“Tap Your Subsidiaries for Global Reach.” Harvard Business Review 64, 87–94.

    Google Scholar 

  • Beamish, Paul W. (1987).“Joint Ventures in LDCs: Partner Selection and Performance.” Journal of International Business Studies27(1), 23–37.

    Google Scholar 

  • Beamish, Paul W. and HuiY. Wang. (1989). “Investment into ChinaVia JointVentures.” Management International Review 29(1), 57–64.

    Google Scholar 

  • Byrd,W. and A. Gelb. (1990). “Why Industrialize? The Incentives for Rural Community Governments.” In William Byrd and Qingsong Lin (eds.), China's Rural Industry: Structure Development, and Reform. Oxford: Oxford University Press, ch. 17.

    Google Scholar 

  • Campbell, N. (1989). A Strategic Guide to Equity Joint Ventures in China. New York: Pergamon.

    Google Scholar 

  • Chaddick, J.R. and B.G. Dale. (1987). “Sourcing from Less Developed Countries: A Case Study.” Journal of Purchasing and Materials Management23, 17–23.

    Google Scholar 

  • Che, J. and Y. Qian. (1998). “Institutional Environment, Community Government, and Corporate Governance: Understanding China's Township-Village Enterprises.” Journal of Law, Economics and Organization 14(2), 1–23.

    Google Scholar 

  • Cho, K.R. (1990). “The Role of Product-Specific Factors in the Intra-Firm Trade of U.S. Manufacturing Multinationals.” Journal of International Business Studies 21(2), 319–330.

    Google Scholar 

  • Chow, G. (1986). “Chinese Statistics.” The American Statistician 40, 191–196.

    Google Scholar 

  • Dacin, M.T., M.A. Hitt, and E. Levitas. (1997). “Selecting Partners for Successful International Alliances: Examination of U.S. and Korean Firms.” Journal of World Business 32(1), 3–17.

    Google Scholar 

  • Davidson, W.H. (1982). Global Strategic Management. New York: John Wiley & Sons.

    Google Scholar 

  • Dunning, J.H. (1988). “The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions.” Journal of International Business Studies 19(3), 1–31.

    Google Scholar 

  • Dunning, J.H. (1992). Multinational Enterprises and the Geographical Economy. Reading, Mass.: Addison-Wesley.

    Google Scholar 

  • Dunning, J.H. (1994). Multinational Enterprises and the Global Economy.Wokingham, England: Addison-Wesley.

    Google Scholar 

  • Frear, C.R., M.S. Alguire, and L.E. Metcalf. (1995). “Country Segmentation on the Basis of International Purchasing Patterns.” Journal of Business and Industrial Marketing 10, 59–68.

    Google Scholar 

  • Ghoshal, S. (1987). “Global Strategy: An Organizing Framework.” Strategic Management Journal 8, 425–440.

    Google Scholar 

  • Gupta, A. and V. Govindarajan. (1991). “Knowledge Flows and the Structure of Control Within the Multinational Corporation.” Academy of Management Review 16(4), 768–792.

    Google Scholar 

  • Helleiner, G.K. and R. Lavergne. (1979). “Intra-Firm Trade and Industrial Exports to the United States.” Oxford Bulletin of Economics and Statistics 41(4), 297–311.

    Google Scholar 

  • Helleiner, G.K. and R. Lavergne. (1981). Intra-Firm Trade and the Developing Countries. London: Macmillan.

    Google Scholar 

  • Hill, C.L., P. Hwang, and W.C. Kim. (1990). “Eclectic Theory of the Choice of International Entry Mode.” Strategic Management Journal 11, 156–162.

    Google Scholar 

  • Hu, M.Y. and H.Y. Chen. (1993). “Foreign Ownership in Chinese Joint Ventures: A Transaction Costs Analysis.” Journal of Business Research 26(2), 149–160.

    Google Scholar 

  • Kennedy, P.A. (1985). Guide to Econometrics, 2nd edn. Cambridge, MA: MIT Press.

    Google Scholar 

  • Kogut, B. (1984). “Normative Observations on the InternationalValue-Added Chain and Strategic Groups.” Journal of International Business Studies 15, 151–167.

    Google Scholar 

  • Kogut, B and H. Singh. (1988). “The Effect of National Culture on the Choice of Entry Mode.” Journal of International Business Studies 19(3), 411–432.

    Google Scholar 

  • Kotabe, M. and G.S. Omura. (1989). “Sourcing Strategies of European and Japanese Multinationals: A Comparison.” Journal of International Business Studies 20(1), 113–130.

    Google Scholar 

  • Kotabe, M. (1990). “The Relationship Between Offshore Sourcing and Innovativeness of U.S. Multinational Firms: An Empirical Investigation.” Journal of International Business Studies 21(4), 623–638.

    Google Scholar 

  • Kotabe, M. (1990). “Linking Product and Process Innovations and Modes of International Sourcing in Global Competition: A Case of Foreign Multinational Firms.” Journal of International Business Studies 21(3), 383–408.

    Google Scholar 

  • Kotabe, M. (1992). Global Sourcing Strategy. New York: Quorum.

    Google Scholar 

  • Kotabe, M. and S.K. Swan. (1994). “Offshore Sourcing: Reaction, Maturation, and Consolidation of U.S. Multinationals.” Journal of International Business Studies 25(1), 115–140.

    Google Scholar 

  • Kotabe, M. (1998). “Efficiency vs. Effectiveness Orientation of Global Sourcing Strategy: A Comparison of U.S. and Japanese Multinational Companies.” Academy of Management Executive 12, 107–119.

    Google Scholar 

  • Kumar, N. (1994). “Determinants of Export Orientation of Foreign Production.” Journal of International Business Studies 25(1), 141–156.

    Google Scholar 

  • Lall, S. (1978). “The Pattern of Intra-Firm Exports by U.S. Multinationals.” Oxford Bulletin of Economics and Statistics 40, 209–222.

    Google Scholar 

  • Laseter, T.M. (1998). Balanced Sourcing: Cooperation and Competition in Supplier Relationships. San Francisco: Jossey-Bass Publishers.

    Google Scholar 

  • Lecraw, D.J. (1984). “Bargaining Power, Ownership, and Profitability of Transnational Corporations in Developing Countries.” Journal of International Business Studies 15, 27–43.

    Google Scholar 

  • Levy, D.L. and J. Dunning. (1993). “International Production and Sourcing: Trends and Issues.” Science, Technology and Industry Review 13, 13–59.

    Google Scholar 

  • Mansfield, E.R. and B.P. Helms. (1982). “Detecting Multicollinearity.” American Statistician 36, 158–160.

    Google Scholar 

  • McKelvey, B. (1982). Organizational Systematics: Taxonomy, Evolution and Classifications. Berkeley: University of California Press.

    Google Scholar 

  • McLaren, J. (1989). “‘Globalization’ and Vertical Structure.” American Economic Review 90(5), 1239–1254.

    Google Scholar 

  • Miles, R. and C.C. Snow. (1978). Organizational Strategy, Structure and Processes. New York: McGraw-Hill.

    Google Scholar 

  • Mintzberg, H.T. (1979). The Structuring of Organizations. Englewood Cliffs, NJ: Prentice Hall.

    Google Scholar 

  • Murray, J.Y. (1996). “Currency Exchange Rate-Driven vs. Strategy-Driven Analysis of Global Sourcing.” Multinational Business Review 4(1), 40–51.

    Google Scholar 

  • Pan,Y.G. (1996). “Influence of Foreign Equity Ownership Level in JointVenture in China.” Journal of International Business Studies 27(1), 1–26.

    Google Scholar 

  • Pearson, M.M. (1991). Joint Ventures in the Peoples Republic of China. Princeton, NJ: Princeton University Press.

    Google Scholar 

  • Pierce, J.L., S.A. Rubenfeld, and S. Morgan. (1991). “Employee Ownership: A Conceptual Model of Process and Effects.” Academy of Management Review 16, 121–144.

    Google Scholar 

  • Porter, M.E. (1986). Competition in Global Industries. Boston, MA: Harvard Business School Press.

    Google Scholar 

  • Porter, M.E. (1991).Towards a dynamic theory of strategy. Strategic Management Journal 12, 95–117.

    Google Scholar 

  • Roth, K., D.M. Schweiger, and A.J. Morrison. (1991). “Global Strategy Implementation at the Business Level: Operational Capabilities and Administrative Mechanisms.” Journal of International Business Studies 22(3), 369–402.

    Google Scholar 

  • Shan,W.J. (1991). “Environmental Risks and JointVenture Sharing Agreements.” Journal of International Business Studies 22(4), 555–578.

    Google Scholar 

  • Sohn, J.H.D. (1994). “Social Knowledge as a Control System: A Proposition and Evidence from the Japanese FDI Behavior.” Journal of International Business Studies 26(2), 295–324.

    Google Scholar 

  • Spekman, R.E. (1988). “Strategic Supplier Selection: Understanding Long-Term Buyer Relationships.” Business Horizon 31, 75–82.

    Google Scholar 

  • Stopford, J.M. and L.T. Well. (1972). Managing the Multinational Enterprise. New York: Basic Books.

    Google Scholar 

  • Swamidass, P.M. and M. Kotabe. (1993). “Component Sourcing Strategies of Multinationals: An Empirical Study of European and Japanese Multinationals.” Journal of International Business Studies 24(1), 81–99.

    Google Scholar 

  • Swamidass, P.M. (1993). “Import Sourcing Dynamics: An Integrative Perspective.” Journal of International Business Studies 24(4), 671–691.

    Google Scholar 

  • Walker, G. and D. Weber. (1987). “Supplier Competition, Uncertainty, and Make-or-Buy Decisions.” Academy of Management Journal 30(3), 589–596.

    Google Scholar 

  • Walker, G., D. Weber, and L. Poppo. (1991). “Profit Centers, Single-Source Suppliers and Transaction Costs.” Administrative Science Quarterly 36, 66–87.

    Google Scholar 

  • Watts, C.A., K.Y. Kim, and C.K. Hahn. (1992). “Linking Purchasing to Corporate Competitive Strategy.” International Journal of Purchasing and Materials Management 28, 2–8.

    Google Scholar 

  • Williamson, O.E. (1985). The Economic Institutions of Capitalism. New York, NY: Free Press.

    Google Scholar 

  • Zhao, H. and G. Zhu. (1998). “Determinants of Ownership Preference of International Joint Ventures: New Evidence from Chinese Manufacturing Industries.” International Business Review 7, 569–589.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. The Washburn Chair of International Business and Marketing, Temple University, USA

    Masaaki Kotabe

  2. The Fox School of Business & Management, The Institute of Global Management Studies, Temple University, 349G Speakman Hall (006-00), Philadelphia, PA, 19122, USA.

    Masaaki Kotabe

  3. John Cook School of Business, The Boeing Institute of International Business, Saint Louis University, 3674 Lindell Boulevard, St. Louis, MO, 63108, USA.

    Hongxin Zhao

Authors
  1. Masaaki Kotabe
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Hongxin Zhao
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Kotabe, M., Zhao, H. A Taxonomy of Sourcing Strategic Types for MNCs Operating in China. Asia Pacific Journal of Management 19, 11–27 (2002). https://doi.org/10.1023/A:1014835506271

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/A:1014835506271

Search

Navigation