How Does Protectionism Impact Multinational Firm Reshoring? Evidence from the UK

Abstract

There is growing interest in the nature and possible extent of de-globalization. This paper explores the impact that protectionist measures have on multinational enterprise (MNE) reshoring back to the UK. Besides taking into account the global trends indicating a return to protectionism, the existing literature highlights various firm-level and structural country-level determinants of reshoring decisions. We test a conceptual model with parent-subsidiary firm-level data for the period 2009 to 2017. We conclude that firms that are more sensitive to wage costs in their overseas subsidiaries were more likely to reshore. We did not find that more capital-intensive firms had a higher propensity to reshore. We find that our results are mostly driven from UK MNEs with subsidiaries in EU. This result has clear implications for a potential Brexit effect. Theoretically, we base our findings in transactional cost economics to help explain why different types of firms behave in the way they do, and why different types of firms may respond in quite different ways to the same mix of institutions.

De-internationalization of cross-border investments from a de-globalization perspective: a systematic literature review and structuring of the field

“…In this light, Zahoor et al (2023) assert that trade protectionism imposes substantial pressure on MNEs, prompting reconfiguration of the GVC. Additionally, Temouri et al (2023) illustrate its impact on MNE re-shoring, however emphasizing the necessity for specific firm characteristics to 42 For instance, the 17 SDGs out of which several directly attack the carbon emission level. 43 Burt et al (2019) explain that after a period of de-regulation -to initially attract inward investmentre-regulation became a constantly repeating pattern across East Asia.…”

“…Second, with de-globalization-driven decisions made under significant uncertainty, future research could delve into a more comprehensive examination of MNE performance (Temouri et al 2023;Pedroletti and Ciabuschi), especially in comparison with peers. This would provide a deeper understanding of the factors that distinguish successful MNEs from less successful ones, highlighting the essential capabilities required to thrive during these times (Teece et al 1997).…”