Global sourcing strategy and its impact on business performance: An empirical study of the fit between global sourcing and strategic decisions

During the last decade, the emergence of total competition in the global market has forced an increasing number of firms to search for the most effective utilization of new technologies and resources dispersed worldwide. In this effort, global sourcing has been widely practiced by multinational firms. While the importance of global competitive strategies and global sourcing has grown rapidly, there have been relatively few empirical studies on these issues. Consequently, many strategic decisions related to global sourcing for enhancing firms\u27 competitive advantage in rapidly changing environmental conditions have not been thoroughly researched. Thus, it is important to empirically examine firms\u27 global business opportunities through global sourcing. The overall objective of this study is to enhance the understanding of successful global sourcing strategies while considering the various facets of the globally integrated competitive strategy. More specifically, this study examines the strategic importance of inter-firm and intra-firm sourcing practices and their impact on business performance. Thus, this study investigates the fit between each type of global sourcing strategy and various strategic factors (including competitive strategy, strategic flexibility, and organizational capability). This research focuses on global sourcing activities of U.S. subsidiaries of European and Japanese multinational firms. An investigation of 88 business units indicates that inter-firm sourcing improves performance with concurrent emphasis of differentiation strategy, geographic diversification, and configuration of value-adding activities, whereas intra-firm sourcing improves performance with low cost strategy, related product diversification, and coordination of value-adding activities. By expanding the theory of global sourcing into international strategy and competitive strategy, this study contributes to the existing literature by recognizing the importance of global sourcing as a competitive weapon