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We investigate the relationship between backshoring of production activities and digital manufacturing technologies, also known as Industry 4.0 (I4.0). We argue that I4.0 supports backshoring because it provides a higher productivity and flexibility which offers an incentive for firms to locate production close to their European customers.The empirical test is based on a large dataset of more than 2,000 manufacturing firms. Backshoring is still a rare event with a share of no more than 4% of all firms. Descriptive statistics as well as regression results indicate a positive correlation between the adoption of I4.0 technologies and companies' backshoring propensity.

This note presents empirical evidence on production backshoringthe movement of production activities from locations abroad back to the home country. Between 2010 and Mid-2012, only four percent of all firms moved production activities back to their home country. For every backshoring firm, there are more than three offshoring firms. Thus, from today's perspective it is unlikely that backshoring will be an important driver of a 'manufacturing renaissance' in Europe. The most frequent reason for backshoring is poor quality of the goods produced at foreign locations, followed by the loss of flexibility and too high transport costs. Sectors with a high backshoring propensity are electrical equipment, communications equipment and the automotive industry. These sectors may be the most obvious candidates for policy intervention to increase the frequency of backshoring in European manufacturing.

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Non-Technical SummarySubsidiaries of foreign multinational enterprises (MNEs) are among the top performers of research, development and innovation in many EU and non-EU countries. In some smallEuropean countries -examples are Austria, Belgium, the Czech Republic, Hungary or Ireland -foreign-owned firms even account for more than 50% of total business expenditure for R&D.The high relevance of foreign ownership for technology and innovation policy calls for a sound understanding of the innovation behaviour of foreign-owned firms and its impact on economic performance. Using the theoretical model of Harrison, Jaumandreu, Mairesse and Peters (2008), this paper contributes to the existing literature by disentangling sources of employment growth by ownership, and it particularly investigates the role product and process innovation play for employment in foreign-owned and domestically owned firms. We examine the link between innovation and employment using a large data set (Community Innovation Surveys CIS4) of more than 64,500 firms from 16 European countries.Previous studies have shown that innovation and technology are key dimensions in which foreign-owned and domestically owned firms differ. There is ample evidence that MNEs tend to possess superior firm-specific assets, operate more frequently in R&D-intensive sectors and employ more highly-qualified staff than domestically owned firms. Both groups also differ in their capabilities to create new products and in their ability to successfully introduce innovations to the market. Our analyses enlighten that these differences, in turn, lead to differences in employment creation and destruction from innovation between the two groups.We find that foreign-owned firms experience higher employment losses than domestically owned firms due to general (non-innovation related) productivity improvements and in manufacturing also partly due to process innovation. A likely explanation for this finding is that foreign-owned firms that introduce new processes adopt superior technologies of their parent companies. In addition and in contrast to domestic firms, most foreign-owned firms are able to produce new products with a higher efficiency than existing products (except for European FOF in manufacturing). These larger productivity gains might be worrying as they imply that foreign-owned firms would need to create much more jobs with product innovation and existing products to meet the employment growth rate of domestically owned f...