Limits to global sourcing?

Abstract

This paper argues for the inclusion of an analysis of industry clusters when making decisions about global or local sourcing. Suppliers are viewed as valuable resources that can contribute to a firm's competitive advantage. Two contrasting case studies illustrate that, contrary to common expectations, a high global sourcing quota does not necessarily improve a firm's competitiveness. Rather, there may be limits to global sourcing, if a firm is unable to become a preferred customer of its strategic suppliers. Achieving preferred customer status is easier for firms located in the same regional or national cluster than it is for foreign firms attempting to access a remote supplier. This paper contributes a new and more differentiated approach to global sourcing decisions by integrating the cluster concept. Furthermore, our findings enrich the discourse of strategic management by supporting the view that resources which enable a firm to achieve sustainable competitive advantages can be located beyond its legal boundaries.