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Abstract Small to medium‐sized enterprises (SMEs) are moving their manufacturing operations from low‐cost countries back to high‐cost countries, reversing earlier offshoring decisions. These reshoring decisions cannot be completely explained by changing location‐related costs. To better understand why SMEs are reshoring, we evaluate nine product‐line decisions – six to reshore and three to remain offshore – and codify four empirical observations. We then integrate these observations with relevant literature to develop and analyze a system dynamics model of SMEs' offshoring and reshoring decisions. Synthesizing the above, we articulate propositions regarding SMEs’ reshoring decisions. We conclude by discussing these decisions through the lens of the heuristic decision‐making literature, providing managerial and policy implications.
Gray et al. (2017) studied this question.