Global sourcing or deep localization: A social capital perspective

Considering the increased importance that ties between different organizations have gained over the last decades in terms of contributing to the creation of value, buyer-supplier relationships have been found more and more as a source of a sustainable competitive advantage. In this context, the terminology of global sourcing, sourcing goods from suppliers on an international scale, has found wide application. Since companies increasingly outsource activities to their suppliers and thus grant them more responsibilities, being able to successfully manage these relationships naturally emerges as necessary requirement. In countries such as China, firms increasingly tend to abandon the global sourcing focus and follow domestic sourcing approaches, going even as far as actively establishing the whole supply chain locally, a strategy also understood as deep localization.

The questions that arise are: How is deep localization conducted? Which roles do buyer-supplier relationships, in particular the social capital underlying them, play? And, how can social capital contribute to successful project outcomes between buyer and supplier? Based on qualitative as well as quantitative research, this study provides answers to these questions while deriving practical recommendations.