An explorative study of the relationship between country reputation and corporate localisation strategies in Italian companies

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Abstract 
 
Over the past years, several companies have changed their localisation 
strategy. This topic has been the object of debate within the academic scenario 
and some authors have revealed the presence of a great number of companies 
that have chosen to bring back their facilities to the country of origin. Some other 
scholars have tried to understand this transformation, identifying among the key 
factors that might positively influence this transfer, the importance of the country 
in which the company produces its goods. For these authors there is a connection 
between the consumers’ purchase and the perception of the extrinsic value of a 
product, such as the country of origin or production and therefore the concept of 
‘Made in’.  
In contrast with previous studies, this exploratory research starts from the 
assumption that if ‘Made In’ is able to influence the process of purchase and 
consumption of a product or service, it can even represent a reason for companies 
to move their plants to the country of origin. Therefore, the point is not to find 
out whether it happens or how many times it happens, but the focus of the 
research is to ascertain why this happens. The final aim of the research is to 
explore the relationship between the localisation decisions of Italian companies 
and the country in which they have decided to localise their plants. In order to 
explore this relationship the work has been focused on a sample of 15 managers 
belonging to three different groups of companies’ localisation strategies: those 
that are involved in back-reshoring, off-shoring and never-shoring. Through an 
in-depth interview with each of them, the researcher has discussed the two main 
topics (reputation and localisation) and has analysed the responses by the 
software tools of MAXQDA and Excel. The use of these tools has been 
integrated with the construction of some cognitive diagrams. In this way, the 
researcher acted as a sense-making device, with the intention of giving a 
complete framework to the object of the study.  
The findings show in which way the country reputation can influence the 
localisation strategies of the Italian companies interviewed. The main idea is 
pointed out in the last paragraph of ‘Findings and discussion’. The choice of 
locating the plant(s) abroad can only be made in certain industries and with 
certain products where the ‘Made in Italy’ and ‘know-how’ do not affect the 
target market.
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1. Introduction 
 
 
Over the last years, globalisation of markets has been one of the main 
phenomena that has transformed the world economic system. The processes of 
territorial integration, the opening of national contexts to foreign markets, and 
the rapid development of technologies of communication and information, have 
redefined the business competitive environment, extending it in terms of space 
and causing a general increase in the levels of competition (Puig and Marques, 
2011). It is not surprising that these changes have also produced a transformation 
in the competitive strategies of companies, for the purposes of the present 
research specifically in terms of the place in which to localise their plant(s).  
Within this highly competitive scenario, several companies have changed 
their localisation decision after some years, moving from a strategy of off-
shoring to a strategy of re-shoring. This topic has been the object of lively 
discussions within the academic environment. In more details, Rancati (2005), 
Brondoni (2008), Puig and Marques (2011), Cotta Ramusino and Onetti (2013) 
dealt with the changes that global companies faced as a result of globalisation. 
Successively, the discussion about localisation choices has been addressed in 
more depth by several authors. Blinder (2006), Gregory Mankiw and Swagel 
(2006), Baronchelli (2008), Budhwar and Varma (2011) have made a significant 
contribution to the studies of off-shoring both from a conceptual and empirical 
point of view. Concerning the practice of re-shoring and back-reshoring, Holz 
(2009), Adefeso (2014), Fratocchi et al (2014) and Hutzel and Lippert (2014) 
have tried to give a comprehensive conceptualisation of this complexity. Thanks 
to the contributions of these authors, the studies have revealed the presence of a 
great number of companies that have chosen to bring back their facilities to the 
country in which they were originally sited.  
Van den Bossche (2014), Bettiol (2015) and Oshri, Kotlarsky and 
Willcocks (2015) have tried to understand this transformation, identifying 
among the key factors that might positively influence the return to the 
motherland, the importance of the country in which the company produces its 
goods. Subsequently, Lucarelli and Giovanardi (2014), Correia et al. (2015), 
Zenker and Jacobsen (2015) and Pasquinelli (2015) pointed out that the country 
image and place brand are influential on the final consumer choice. In addition,
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Go and Govers (2011), Samli (2012), Becheri and Maggiore (2013), Bettiol 
(2015), Garbellano, (2015) dealt with the influence of the country of production 
on consumer choice. For these authors there is a connection between the 
consumers’ purchase and their perception of extrinsic value, such as for example 
the country of origin or production, which is nothing more than the concept of 
‘Made in’. Finally, Kubacki (2014) tried to understand the relationship between 
FDI and country of origin, whereas Fratocchi et al (2014) focused their research 
on the back-reshoring strategy. Given that the ‘Made in’ idea is part of the bigger 
concept of country reputation and back-reshoring is included in the bigger issue 
of localisation strategies, this project intends to focus more specifically on the 
concept of country reputation and localisation strategies, within the Italian 
business environment. In contrast with previous studies, this research starts from 
the assumption that "Made In" is able to influence the process of purchase and 
consumption of a product or service can even represent a reason for companies 
to move their plants to the country of origin. The final aim of the research is to 
explore the relationship between country reputation and localisation strategies 
of the Italian company.  
In order to develop this topic, Chapter 2 addresses the analysis of the 
literature, concerning the strategies of localisation and their link with the country 
reputation issues. Chapter 3 discusses the methodology used for the data 
collection, the system of data analysis and the software used for the data 
processing. In Chapter 4, the findings are illustrated through subdivision into the 
two main themes of the research object of this study. Each topic addressed with 
the manager interviewed is here analysed and described. The last paragraph in 
this chapter is going to explain in which way the country reputation issues affect 
the localisation decision process. Successively, in Chapter 5 the researcher gives 
a summary of the research and some insights for managerial implications. Here, 
there are also some comments on the limitations of the research and the 
necessities and potential for further research. Finally, Chapter 6 and 7 contains 
respectively the bibliography and acknowledgments.
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2. Literature Review 
 
 
2.1. Localisation and main “shoring” strategies 
 
The importance and the complexity of the studies about localisation 
decisions has increased, as they tend to strongly influence a company's ability to 
achieve a better competitive performance than its competitors (Puig and 
Marques, 2011). According to Brondoni (2008), globalisation is changing the 
traditional relationships of space and time competition and companies are 
turning towards 'time based management' and 'market space competition'. On the 
one hand, they have to deal with the administration of increasingly fast action-
reaction times, whereas on the other hand they have to face overcoming the static 
and confined conception of space (Rancati, 2005). These factors lead companies 
to assess specific geographical contexts for the development of specific 
competitive advantages such as marketing, R&D and mainly production. It so 
happens that, in situations of high global competition, many companies now 
have to make strategic decisions of great importance. These greatly affect the 
choice of the location in which a company might seek to achieve advantages 
over competitors (Cotta Ramusino and Onetti, 2013). In more detail, after a 
period of enormous delocalisation towards countries with low labour costs, in 
recent years the lively debate on localisation decisions in academic and business 
environments is showing a practice increasingly used in the USA and Europe: 
the homecoming to the motherland of many companies. The phenomenon is 
catching on in several manufacturing sectors, from clothing and footwear to 
mechanical and electronic engineering, involving the entire production chain, 
from raw materials to finished products (Adefeso 2014).  
In this first section, the objective is the analysis of the literature about the 
two main localisation strategies - off-shoring and re-shoring - in order to have a 
clear conceptualisation of the phenomena. Indeed, though specialised reviews 
and academic commentators are showing growing and significant interest in this 
topic, nowadays it does not yet exist as a shared classification and description of 
localisation strategies. Fratocchi et al (2014) highlight that each localisation 
strategy can be divided into two phases: the first is the reallocation of production
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activities within the company, while the second occurs after the first one if one 
decides to relocate to the original country the activities previously moved 
abroad. In the first phase, managers can choose two options: to move to foreign 
countries that are still close to the region where the enterprise is established 
(near-shoring), or to opt for the localisation of activity in a foreign country far 
away from the company's country (off-shoring). Subsequently, if the company 
decides to reassess its localisation strategy, the management would be faced with 
three possible alternatives. Firstly, to expand off-shoring by shifting production 
to yet another country far from the initial country of origin (further off-shoring). 
Secondly, to move the production to a foreign country geographically closer to 
the country where the company is or was originally based (near-re-shoring). 
Thirdly to bring production back to the country where the business was located 
at the beginning (back-reshoring). 
Therefore, there are two main strategies of geographical localisation of 
production plants: one is off-shoring and the other one is re-shoring. In addition, 
depending on whether the place is more or less close to the place of origin we 
can talk about proximity (near-) or distance (further-), whereas when you 
definitively come back home, we talk about back-reshoring. The point is to make 
the right choice, optimising the localisation of activity and taking advantage of 
key factors like costs, market and resources, in order to get the most efficient 
solution in terms of profit, performance and customer satisfaction (Adefeso 
2014). 
 
 
2.1.1. The off-shoring strategy  
 
According to Blinder (2006) off-shoring is an international strategy, 
which consists in relocating part of the production process to a foreign country. 
It is characterised by the fragmentation of the value chain of a company between 
production units located in different countries and is an old practice: many 
companies, especially multinationals and global companies, have fragmented 
their production process across multiple plants and different countries 
increasingly since the 1980s. Since the early 2000s, the phenomenon of off-
shoring has, however, fuelled an interesting public debate, particularly in the