256 Int. J. Entrepreneurship and Small Business, Vol. 4, No. 3, 2007 Development, motives and employment effects of manufacturing offshoring of German SMEs Steffen Kinkel*, Gunter Lay and Spomenka Maloca Fraunhofer Institute for Systems and Innovation Research (ISI) Breslauer Str. 48, 76139 Karlsruhe, Germany Fax: 0721/6809–131 E-mail: steffen.kinkel@isi.fraunhofer.de E-mail: gunter.lay@isi.fraunhofer.de E-mail: spomenka.maloca@isi.fraunhofer.de *Corresponding author Abstract: 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 particularly 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. Keywords: offshoring; production relocation; backsourcing; motives; employment growth. Reference to this paper should be made as follows: Kinkel, S., Lay, G. and Maloca, S. (2007) ‘Development, motives and employment effects of manufacturing offshoring of German SMEs’, Int. J. Entrepreneurship and Small Business, Vol. 4, No. 3, pp.256–276. Biographical notes: Dr. rer. pol. Steffen Kinkel studied Industrial Engineering at Karlsruhe University, specialising in corporate planning. He joined the Fraunhofer Institute for Systems and Innovation Research (ISI), Karlsruhe, in 1996. In 2003, he obtained a doctorate at Stuttgart University in Business Administration with his thesis on Dynamic Location Assessment and Strategic Location Controlling. He became the Deputy Head of the Industrial and Service Innovations Department in June 2003, and since July 2004, he has been the Head of the same department. Besides his research at Fraunhofer ISI, he lectures at Technical College Heidelberg on business management and corporate planning. The main focus of his research is international production and strategic controlling. Several of his publications examine production relocations and repatriation of production activities back home as well as holistic evaluation instruments for strategic location decisions of companies. Copyright © 2007 Inderscience Enterprises Ltd.