Locus of supply and global manufacturing

Interest in supply chain management has been escalating during the last decade. Using a large sample of durable goods firms located in all major regions of the world, we extend two theoretical perspectives, namely the resource-based view and the transaction cost economics view of the firm, to better understand the issues behind global sourcing. Both theory extensions were supported in separate by statistically significant regression results. Then, pooling predictors to represent both models together, these measures independently increase the odds of predicting global sourcing. For example, building of a firm's technological capabilities that was captured through the levels of its R&D intensity, and percentage of revenue it generated from its new products was directly related to the increased levels of a firm's global sourcing. Transaction costs (e.g. vertical integration, inversely related; length of frozen schedules, directly related) also emerged as a significant predictor of the level of global sourcing undertaken by a firm. This suggests that firms have two alternative ways to globalize operation's supply, and raises the interesting question of whether or not these two strategies might operate simultaneously.