The Transfer of Domestic-Market Production to a Foreign Site

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Abstract
The process of transferring production for a domestic market from a domestic site to a lower-cost foreign site is analyzed to determine under what conditions the firm will realize an economic benefit from such a transference. Assumptions are made concerning the particular production technology of interest, and models of both foreign and domestic costs are drawn from these assumptions. The managerial decision of whether or not to move production to the overseas location is framed in terms of a planning model, but the emphasis is on determining the breakeven times for domestic versus foreign operations as functions of the parameters of the various cases which comprise the off-shore sourcing possibilities.

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