Considering a growing emphasis on sustainability, companies that historically pursued offshoring for cost efficiency are now broadening their focus from shareholders to a wider range of stakeholders. In this regard, this study investigates how a company's performance in environmental, social and governance (ESG) areas can serve as a critical framework for evaluating global production realignment (GPR).
Utilizing a unique dataset of 1,755 firm-year observations collected over 14 years, this study analyzes the influence of the three ESG pillars – social responsibility, governance and environmental performance – on GPR announcements.
The results demonstrate that firms exhibiting higher levels of social responsibility are more prone to make GPR announcements, while robust governance is associated with a reduced likelihood of such announcements. Furthermore, controversies surrounding a firm moderate the relationship between social responsibility and GPR announcements, where fewer controversies significantly amplify the positive impact of social responsibility. Additional investigation also reveals that foreign incorporated firms exhibiting higher levels of environmental performance are less likely to make GPR announcements.
This study examines GPR announcements in the United States and improves our theoretical understanding by clarifying the complex role that ESG dimensions play in GPR decisions. It also provides practical insights for managers on how to effectively incorporate ESG performance into their strategic decision-making processes.
Even though this dataset spans 14 years (from 2008 to 2022), it does not reflect the recent discussion around tariffs. To be fair, we might see that effect in GPR in a few years and not immediately.
This study is among the first to examine empirical data on reshoring and sustainability. Additionally, it emphasizes the importance of social and governance performance in relation to GPR announcements, while indicating that the impact of a firm’s environmental performance is more nuanced. This study also explores the moderating role of controversies that have not been examined in the context of GPR announcements.
