Near-shoring versus far-shoring: effects on customer perceived quality and purchase intention

Abstract

PurposeDriven by the disruptive effects of the Covid-19 pandemic, the ongoing debate about the international location of firms' manufacturing activities has increasingly highlighted the specific benefits and costs of near-shoring versus far-shoring. However, the effects of near-shoring versus far-shoring on customer perceived quality and purchase intention have not been examined. Thus, this study aims to develop a conceptual model and provide new evidence to fill this gap. In particular, the study explores the roles of brand familiarity and corporate social responsibility (CSR) to explain the different levels of perceived quality and purchase intention in relation to near-shoring versus far-shoring.Design/methodology/approachThis study includes two analyses of data collected from a sample of Italian customers. The first analysis consists of a 2 (high/low brand familiarity) × 3 (domestic insourcing, near-shoring, far-shoring) factorial design, and data are assessed via analyses of variance (ANOVA). The second analysis evaluates the suggested model in the two scenarios (near-shoring and far-shoring) via partial least squares–structural equation modelling (PLS-SEM) multigroup analysis.FindingsResults showed that customer perceived quality and purchase intention were significantly higher for near-shoring than for far-shoring, but only when brand familiarity was low. No significant difference was found for participants with a high level of brand familiarity. In addition, the level of a brand's pre-offshoring perceived CSR was negatively related to perceived quality, and this was conceptually justified by the CSR-washing effect. Again, this effect was found only when brand familiarity was low.Research limitations/implicationsThe findings contribute to advancing the current understanding of the multiple effects of the offshoring decision and clarify that near-shoring and far-shoring have different effects for customers with low brand familiarity. The findings also emphasise that the far-shoring decision can elicit the perception of decoupling between the firm's CSR claims and CSR actions, thus decreasing perceived quality.Practical implicationsThis study provides managers with additional inputs to make more informed decisions regarding offshoring. While the post-pandemic scenario seems to favour near-reshoring over far-shoring due to agility considerations, this study also provides additional evidence of the superiority of near-reshoring from the customer's perspective.Originality/valueThis is the first study to examine and prove the differential effects of near-shoring versus far-shoring on the customer's perceptions and behaviours.