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Purpose The purpose of this paper is to investigate how automation adoption contributes to reshoring across industries in EU countries. Design/methodology/approach The analysis uses the methodology of panel general method of moments (GMM) regressions, data for 27 EU countries, spanning the period 2000–2014 to identify the link between automation and reshoring. The study also examines the interaction role of patents and labour productivity on the link between automation and reshoring and underscores the pivotal role of innovation in shaping international production locations and trade flows. The analysis also considers the separation of the EU sample into North and South European countries to investigate whether the automation−reshoring nexus persists even when countries are huddled together based on their income/geographical classification. Finally, by considering 56 industrial sectors, robustness checks whether the link under study is prevalent across them. Findings The analysis documents that automation in the home country increases reshoring. Furthermore, the results highlight that patents in the automated processes positively enhance reshoring. High innovation can provide more control and quality oversight and reduce disruptions caused by out-of-spec materials. Originality/value To the best of the authors’ knowledge, this has been the first study that provides solid information on the link between automation and reshoring in the EU area. In addition, this study is also pioneering in assessing the role of innovation in shaping the link between automation and reshoring. Such findings clearly show that automated patent technologies can potentially substitute human labour, making it more cost-effective for companies to manufacture products domestically rather than outsourcing to low-income countries.
Xu et al. (Tue,) studied this question.