Are Reshoring Decisions Influenced by External Stakeholders and Country‐Level Environmental Regulation?

Abstract

The rationale behind reshoring activities remains unclear. Multinationals reshore their subsidiaries when regulations in the host country become too costly or difficult to manage. However, it is unclear whether the positive association between the propensity for reshoring subsidiaries and the host country's regulations applies to all types of subsidiaries (i.e. majority or minority owned) and whether it is moderated by other factors. We suggest that external stakeholders play a crucial role in strengthening the relationship between the decision to reshore and the host country's regulations. Within the context of international business, we examine the reshoring decision of a panel of subsidiaries controlled by UK multinationals located in 39 countries and focus on a specific set of environmental and corporate governance regulations. Our findings suggest that reshoring amongst minority-owned subsidiaries is more likely to happen in countries with weak protection of shareholders and mandatory environmental disclosure. Such a relationship is also strengthened by the presence of external stakeholders, namely, foreign directors sitting on subsidiaries' boards. We contribute to the reshoring literature by showing the role of external stakeholders and the impact of institutions and regulatory requirements on reshoring decisions.

Reshoring: A Road to Industry 4.0 Transformation

“…The contributed papers provide valuable insights into the reshoring literature by examining the decision‐making processes (Sena et al. , 2022), consumer perceptions (Dey et al. , 2022; Foroudi et al.…”

“…(2022) develop a consumer behaviour framework for reshored brands, emphasizing the significance of positive consumer attitudes on purchase intentions, while Sena et al. (2022) examine the role of external stakeholders and country‐level environmental regulation in reshoring decisions. Zhang et al.…”

“…Reshoring decision considering stakeholders and environmental regulation (Sena et al, 2022) Reshoring of manufacturing operations in SDGs context (Choudhary et al, 2022;Fjellström et al, 2023;Zhang et al, 2022) Prior research on reshoring the localization of products and services as the future of global manufacturing cannot be ignored. Moreover, localization as a phenomenon originated from the need to offer content in various languages.…”

“…This special issue on reshoring and SDGs represents the culmination of work by various scholars in the fields of international business, international marketing and international trade. The contributed papers provide valuable insights into the reshoring literature by examining the decisionmaking processes (Sena et al, 2022), consumer perceptions (Dey et al, 2022;Foroudi et al, 2022;Gillani, Kutaula and Budhwar, 2022) and various factors influencing the reshoring of manufacturing operations (Choudhary et al, 2022;Fjellström et al, 2023;Zhang et al, 2022) in the context of SDGs. Choudhary et al (2022) challenge the assumption that reshoring automatically enhances supply chain sustainability, arguing for a more nuanced understanding of reshoring as a system reconfiguration.…”

“…The decision to reshore impacts small firms in host countries that serve large firms from foreign markets (Sena et al. , 2022). Offshoring to a manufacturer outside the home country bolsters the job market in the host country by providing employment opportunities for both skilled and specific categories of unskilled workers (Piatanesi and Arauzo‐Carod, 2019).…”