Abstract
The manufacturing location decision is inherently complex, resulting in supply chain tradeoffs between high-cost and low-cost manufacturing locations. Optimizing this decision can result in a firm's ability to be more profitable. Using the eclectic theory of international production, we use a short-term event study to investigate the impact on shareholder wealth after firms announce their manufacturing location decision. Our study uses 329 manufacturing location announcements and offers a comparative analysis to investigate the stock price impact for U.S. firms (n = 100) and foreign firms (n = 229) reshoring, relocating, or expanding manufacturing operations in the U.S. We find that there is a significantly more positive abnormal stock market return when U.S. firms announce the U.S. as a manufacturing location compared to when foreign firms make similar announcements. In addition, we offer specific conditions under which U.S. and foreign returns will be higher or lower than average, providing insight for managers, investors, and legislators.
Published Version
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