SME internationalisation: offshoring, “backshoring”, or staying at home in New Zealand

Purpose – This paper aims to focus on production offshoring and “backshoring” in a representative sample of 151 New Zealand manufacturers. It identifies how and why firms offshore; why many increase their offshoring while others “backshore”; and why most firms continue to compete internationally without offshoring. Design/methodology/approach – Data collection used a two-wave postal questionnaire survey of 676 firms, with a usable response rate of 22.3 per cent and no indication of non-response bias. Findings – Most exporters manufactured only from their New Zealand base, but 44 per cent had outsourced some production offshore in the period 2001 to 2011. Among the 67 offshored firms, 11 had then “backshored” to New Zealand. The main reasons for offshoring were lower labour costs and capacity constraints in New Zealand. “Backshoring” occurs when lower labour costs become offset by impaired capabilities in flexibility/delivery; quality; and the value of the Made in New Zealand brand especially among consumer goods producers. Stay at home firms reported fears of lowered quality; country loyalty; and their Made in New Zealand country of origin brand. Practical implications – Offshoring begins tentatively but many firms then increase their offshoring to reap the benefit of lower labour costs. These reasons for “backshoring” mirror those given for keeping production in New Zealand and must be given careful consideration by firms considering offshoring. Originality/value – There are few studies of offshoring by smaller manufacturers and none that have elucidated this as a process, one that is still avoided by many and can end in costly “backshoring” for others.