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Captive Offshoring of New Product Development in Brazil

How Does Arbitrage Influence Local, Collaborative Relationships?

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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.

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Notes

  1. Although the variable size has been used as a proxy for many different ideas, its relationship with resources and capabilities in MNC subsidiary research, especially in R&D, product development or related areas, is straightforward because these areas are both intensive in highly qualified people and require specialized resources, such as laboratory equipment.

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Acknowledgements

The author thanks the editors and the anonymous reviewers for their helpful suggestions and comments.

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    Dirk M. Boehe

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Boehe, D.M. Captive Offshoring of New Product Development in Brazil. Manag Int Rev 50, 747–773 (2010). https://doi.org/10.1007/s11575-010-0054-z

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