• Journal of Korea Trade
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• v.25 no.3
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• pp.21-47
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• 2021

Purpose - Offshoring has emerged as one of the major trends in international trade and has become one of the strategies for achieving competitiveness in the global market. In spite of this, the expected gains of offshoring can be offset by hidden costs and risks, such as those associated with the COVID-19 pandemic, the trade war between the USA and China, and the ongoing trade dispute between Korea and Japan. To obviate such business failure and prevent critical business blunders, offshoring strategies that efficiently consider both risk elements and potential wealth creation are urgently need. The first purpose of this study is to contribute to the development of more advanced offshoring strategies to help host countries select the best locations to manage supply chain risks and create unique value. The second purpose is to specifically analyze the current status of Korea and provide Korean companies with implications to be considered when deciding whether to offshore or re-shore. Design/methodology - A Network DEA model was applied to measure the comparative location efficiency of national competencies for offshoring strategy from perspectives of wealth creation opportunities (profitability and marketability) and supply chain risk management. The location efficiencies are compared among a total 70 countries selected from the Global Competitiveness Index (GCI) and globally attractive locations outlined by Kearney (2017). For the secondary analysis of efficiency, a t-test examining the nature of competitive advantage and the level of sophistication in production processes was implemented in three divisions. We then analyzed differences in offshoring performance in terms of the identified national traits. Moreover, Tobit regression analysis is conducted to investigate the correlation between value-added business activities and each divisional efficiency, seeking to determine how each degree of value-added business activity influences the increase in offshoring productivity. Findings - Regarding overall location efficiency for offshoring performance, only the USA and Italy were identified as being efficient as host countries for offshoring, under circumstances of advanced development, such as productivity and risk management. Korea ranks 13th among 70 countries. The determinants of national competitiveness depend on national traits (the nature of competitive advantage and business sophistication). Countries with labor/resource advantages and labor-intensive industries are more competitive in terms of marketability than others. In contrast, countries with strong technology-intensive industries benefit offshoring companies, particularly in the technology sector, with the added advantage of supply chain risk management. As the perception of a value chain is broader in a country, it can achieve both production sophistication and competitive advantages such as marketability and SCRM. Originality/value - Existing studies focus on offshoring effectiveness from a company perspective. This paper contributes to comparing country efficiency in producing core competencies related to an offshoring strategy and also segments countries into three performance-based considerations associated with the global offshoring market. It also details Korea's position as an offshoring location according to national efficiency and competency.

• Asia-Pacific Journal of Business
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• v.10 no.3
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• pp.1-16
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• 2019

This paper examines how firm's investment has been affected by offshoring and financialization in Korea over the period 2000-2014 by using industry-level data collected from World Input Output Database (WIOD) and firm-level data collected from the KIS-Value Database. The findings are summarized as follows. First, offshoring index as expected shows a negative relationship with real investment. This negative impact is stronger in a large firm group. Second, there is a positive relationship between dividend payments and real investment. The positive relationship is greater in a small & medium-sized firm group. Third, the purchase of financial assets and the income generated from financial assets are positively related to real investment. The positive relationship is stronger in the small & medium-sized firm group. The empirical results show that firm size is a factor that effectively affects firm's real investment. This paper suggests that the influence of financialization and offshoring on firm's real investment should be assessed in various contexts rather than in a unilateral context.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.14 no.10
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• pp.4784-4790
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• 2013

As with fast growing globalization, Korean firms have increased their offshoring activities and more empirical research are needed to analyze the effect of offshoring on Korean firms' productivity. This study used "Survey of Business Activities", a firm-level panel data set surveyed by the Statistics Korea between 2006 and 2008, and estimated pooled OLS and Panel fixed effect model to examine the impact of offshoring on a firm's labor productivity. Unlike the previous studies on offshoring, we included in the analyses the firms in the service industry in addition to those in the manufacturing industry, and presented the comparative results. The results from pooled OLS model show that 1% increase in the share of offshoring output will lead to 0.03% increase in labor productivity. However, the results from Panel model show that the effects of offshoring on productivity is positive but statistically insignificant. Analyzing the manufacturing and the service sector separately, the main results based on Panel model can be summarized as follows: Offshoring has significant positive effects on firms' productivity in the manufacturing industry. Contrastingly, the impact of offshoring on firms' productivity in the service industry is estimated to be negative but statistically insignificant. Other than the share of offshoring output, most factors except headquarter location have positive effects on firms' productivity in both manufacturing and service industry.

• Journal of Digital Convergence
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• v.18 no.12
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• pp.183-193
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• 2020

This study attempts to interpret the causes of offshoring and reshoring, find out facilitating factors and the areas where these happen mainly. In viewpoint of self-organization phenomena, the theory of prospect, quantitative analysis is performed by utilizing actual data of American Reshoring Association. This study shows that offshoring to the U.S. is positively correlated with market power in the U.S. and innovation of investment countries, while reshoring to U.S. is positively correlated with market power in the U.S. not with technology innovation. The reshoring of U.S. companies is influencing offshoring to U.S, emerging countries such as Asia tends to focus offshoring in short catch up cycle area like IT. This study is expected to contribute to investment support policy and decision for optimal production site. Further study will complete the economic benefit assessment model by reinforcing the impact factors of reshoring and offshoring.

• Journal of Korea Trade
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• v.27 no.5
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• pp.113-136
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• 2023

Purpose - Global production chains and their impacts on economic growth have drawn extensive attention from researchers. Close relationships among global production chains, export and economic growth have been illuminated, as evidenced by the fast and stable economic growth of East Asian economies. These economies perform various roles within global production chains using offshoring, in which the impact of import on domestic gross output is as strong as that of export. The impact of import on economic growth would depend on whether imported inputs substitute or complement domestic inputs production, which is likely to vary according to individual countries' functions within global production chains. The economic growth of concerned countries would also be diverse. However, little attention has been paid to the impact brought by imports compared to its significance. Design/methodology - The principal methodology used in this paper is structural decomposition analysis (SDA), widely chosen to elucidate the impact of various factors on domestic gross output using input-output tables. This paper extracts trade data of six Asian economies from the World Input-Output Database (WIOD) 2016 release that covers 43 countries for the period 2000-2014. The extracted data is then categorised into 37 sectors. First, this paper calculates the Feenstra-Hanson Offshoring Index (OSI) of each country. It then applies SDA to measure the changes in each economy's gross output, export, import input coefficients, and domestic input coefficients. Finally, after taking the first difference from pooled time-series data, it estimates the correlations between imported input coefficients and OSI using the ordinary least square (OLS) method. Findings - The main findings of this paper can be summarised as follows. Firstly, all six countries have increasingly engaged in global production chains, as evidenced by the growing size of OSI. Secondly, there are negative correlations in five countries except Japan, with sectoral differences. Thirdly, changes in import input coefficients are not negative in all six countries, indicating that offshoring does not necessarily substitute for domestic inputs production but does complement it and, therefore, fosters their economic growth. This is observed in China, Indonesia, Korea and Taiwan. Offshoring has led to an increase in the use of imported inputs, which has, in turn, stimulated domestic inputs production in these countries. Originality/value - While existing studies focus on the role of export in evaluating the impact of participating global production chains, this paper explicitly examines the unexplored impact of import on domestic gross output by considering both the substitution and the complementary effect, using the WIOD. The findings of this paper suggest that Asian economies have achieved fast and stable economic growth not only through successful export management but also through effective import management within global production chains. This paper recommends that the Korean government and enterprises carefully choose offshoring strategies to minimise disruption to domestic production chains or foster them.

• Economic Analysis
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• v.25 no.3
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• pp.30-69
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• 2019

This paper analyzes the effects of trade on demand for labor of trading firms in Korea. We apply system GMM methodology to estimate the effects of imports and exports on employment of Korean manufacturing firms using firm-level data from the Survey of Business Activities of Statistics Korea between 2006 and 2014. According to our estimated results, for firms with high-productivity, exports have a positive and significant effect on the labor demand, while other firms do not show any such significant effects. Furthermore, our results show that offshoring mitigates the positive effects of exports on employment, since tasks within the firms can be relocated abroad. On the other hand, an increase in imports reduces demand for labor because labor is replaced with low-priced imported inputs. Also, when firms partake in global outsourcing, the negative effects of imports are mitigated as those firms expand their production by enhancing their efficiency in the process of offshoring. Therefore, our results suggest that it is important to consider heterogeneous firm productivity as well as offshoring in analyzing the effect of trade on labor demand of firms.

• Korean Management Science Review
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• v.27 no.2
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• pp.1-20
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• 2010

Many firms are trying to acquire innovative technologies and relative knowledge by offshoring R&D work. Although research to date has focused on the multinational corporations' motivations of R&D offshoring, such as cost reduction and market expansion, little is known about external or environmental factors influencing the performance of global R&D activities. We investigated the relationship between the offshore R&D performance and the technical capabilities of the parent company, the host country and the home country as enhancers from outside R&D facilities. The analysis uses European patent data and EU R&D scoreboard of 134 overseas R&D labs from 46 multinational corporations in 2005. Also, we calculated total patent number of each country for this. Results from path analysis supported our main hypothesis that the technological capabilities of the parent company and the host country positively affect the overseas R&D performances. By multi-group analysis, we also found that the relationships among the variables are different for each industry.

• Journal of Korean Society of Industrial and Systems Engineering
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• v.33 no.3
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• pp.225-232
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• 2010

글로벌 IS 소싱이 확산됨에 따라 다국적 팀원들로 구성된 글로벌 프로젝트 팀이 급격히 늘어나고 있다. 상이한 시간대에 위치한 팀원 간의 상호작용이 필수적인 글로벌 프로젝트는 이러한 시간적, 공간적 복잡성 때문에 프로젝트의 성공적 수행에 많은 어려움을 겪고 있다. 본 연구는 성공적인 글로벌 프로젝트 수행에 필요한 프로젝트 관리 역량에 대한 탐색적인 연구 조사를 하고자 한다. 본 연구는 글로벌 프로젝트 관리 역량을 정보 기술적 역량(IT capability)과 인적 자원 역량(human resource capability)의 관점에서 고찰하였다. 연구 결과에 따르면 기술적 역량으로는 팀원 간의 조정 및 지식 공유 등을 지원하는 협업 도구(collaborative tools)가 프로젝트 성공에 중요한 역할을 하고, 인적 자원 역량과 관련해서는, 기존에 중요시 여겨지던 기술적 지식들 보다는 경영학적 관리 지식 및 의사 소통 능력 등이 중요시 여겨지는 것으로 나타났다. 인적 역량의 관점에서, 본 연구 결과는 해외소싱이 활발해 짐에 따라 프로젝트 관리자(Project Manager, PM)들이 가져야 하는 주요지식으로 기존의 기술적 지식의 비중은 급격히 줄어든 반면, 의사소통 능력, 해외개발 인력관리, 소싱전략 등과 같은 관리에 대한 지식과 비즈니스 업무지식이 점차 중요해 지고 있음을 보여주고 있다. 한국의 해외 소성은 매우 초기 단계에 있지만 본 연구는 차제에 한국의 IT 인력 특히 PM 인력들이 갖추어야 하는 지식요건과 해외소성을 관리하기 위한 기술적 역량 등에 대한 방향을 제시하고 있다는 점에서 의의가 있다.

• East Asian Journal of Business Economics (EAJBE)
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• v.10 no.4
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• pp.75-90
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• 2022

Purpose - This study aims to study the activation pattern of declining industries by applying the Gompertz growth model using available resources based on the theory of industrial life cycle, classifying declining industries among Korean manufacturing industries, and identifying resource input characteristics. Research design and methodology - This study was conducted by combining the Gompertz growth model that predicts the limit of output based on available resources under the industrial life cycle theory. Using Gompertz model, this study analyzed the life cycle of 39 Korean manufacturing industries from the perspective of domestic production, number of employees, and fixed assets Results - According to a life cycle analysis of 39 manufacturing industries in Korea, the computer, textile, and shoe industries were classified as declining industries. Among them, research on resource input characteristics on the shoe industry showed that domestic production and the number of employees decreased, while the proportion of domestic R&D personnel and the number of research departments gradually increased. Conclusion - Among the declining industries in Korea, the shoe industry is considered to revitalize the industry, that is, to extend the life of the declining industry by offshoring its production site and improving constitution with a "R&D center for global" support.

• Journal of Distribution Science
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• v.13 no.4
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• pp.35-43
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• 2015

Purpose - This study aims to seek various plans to maintain the advancement of the overseas and domestic employment scenario through a case analysis of the Japanese industry, which maintains domestic employment while promoting the overseas advancement of companies despite having a similar industrial structure as Korea. The study further intends to derive insightful implications for Japanese manufacturing companies and government policies. Research design, data, and methodology - We selected four companies from the Japanese manufacturing industry. Being companies that were successful in increasing the domestic employment scenario while advancing in overseas markets. We utilized several secondary data sources including Japanese newspapers and report literature. Results - Previous studies have shown a negative relationship between Foreign Direct Investment (FDI) or offshoring and domestic employment. However, our results showed this relationship with respect to the Japanese manufacturing industry as follows: 1. FDI for developing overseas markets does not decrease domestic production. If Japanese companies change their strategy from exports to overseas production, there will be a consequent decrease in domestic employment of Multinational Enterprises (MNEs). However, the local production that plans the sales expansion of a foreign market does not substitute domestic production. 2. Several case studies illustrate that, as the production of final goods is expanded in foreign countries, there is a corresponding increase in the export of intermediary goods from Japan. In this case, if the production process of Japanese companies is promoted in foreign markets, the amount of exported material and parts from Japan will consequently increase. 3. It is difficult to consider that the establishment of subsidiary companies in foreign countries by manufacturing companies for wholesale, retail, and services decreases domestic employment. This is because the international development of these industries needs expatriates, expatriate training organizations, and research and development (R&D) activities. 4. When there is overseas demand, the growth of local management activities is expected to increase the work of the overseas business department in the head office in Japan, if competitiveness can be secured for better localization and management speed. 5. The conversion of the domestic manufacturing industry into high value-added production is necessary. The relocation of domestic production to foreign markets decreases domestic employment. To prevent this, the upgradation of domestic production bases, including high value-added production, and R&D capability need to be strengthened. Technology-based companies must develop new technology, patents, processes, and so forth, which require extensive human resources for R&D. Conclusions - Domestic medium-sized companies that are capable of consistently supplying high value-added products should be actively encouraged to deploy into and develop overseas markets. Further, this paper considers the necessity of a guidance policy that provides suggestions for overseas deployment, by the initiation of the government, to companies that cannot do so due to the lack of foreign experience or decisions by the CEO, despite having the relevant capability and technologies to supply high value-added products.