Development, motives and employment effects of manufacturing offshoring of German SMEs

This paper examines the extent, the target regions, the motives and the employment effects of manufacturing offshoring on the basis of a survey of 1450 companies in the German manufacturing industry. The findings show that German SMEs particulary favour the 'physically and mentally close' new EU member states over more distant Asian countries. Simultaneously, they do not put the same emphasis on market and customer orientation as larger companies do. This has to be critically reviewed, as cost-driven manufacturing offshoring has a more negative impact on the employment situation at the home base than market-driven activities. The analysis also points out that manufacturing offshoring cannot be described as a one-way road. Backsourcing activities obtain a significant share and are mirroring the trend in offshoring with a time lag of two years. The paper closes with suggestions on how these findings should be regarded in future research.