01.12.2010 | Research Article
Captive Offshoring of New Product Development in Brazil
How Does Arbitrage Influence Local, Collaborative Relationships?
Erschienen in: Management International Review | Ausgabe 6/2010
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Abstract
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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.
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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.
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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.
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Our findings imply that arbitrage in multinational contexts affects the interdependence between resources and transaction costs.