The global recession and the shift to re-shoring:Myth or reality?

Abstract

Despite the high degree of attention that re-shoring has recently attracted in the media, we lack detailed understanding of the drivers of such an important strategic change by a multinational enterprise (MNE). We offer the first large-scale analysis of the factors that influence a firm's decision to re-shore. Our analysis is based on 3683 MNEs from 14 developed countries investing in 66 host countries over the period 2006–2013. Our results suggest that increased re-shoring was triggered by the downturn in the West resulting from the recent global financial crisis. However, our results show that the effect of the global financial crisis on re-shoring is smaller when the distance between parent and subsidiaries becomes larger. In turn, as distance increases, the importance of relative costs declines in explaining re-shoring activity. Finally, MNEs who have engaged in re-shoring in the past are more likely to re-shore again.