Global Production Reconfiguration: Automation, Disruptions, and Sustainability as Drivers of Outward FDI Decline

Outward foreign direct investment (FDI) from advanced economies has contracted in recent years, raising questions about the stability of global production networks and the geography of comparative advantage. Such declines are often interpreted, at least in part, as indicative of reshoring, defined as the reallocation of production from foreign to domestic or proximate locations. This study presents the first country-sectoral panel analysis to jointly assess the technological, geopolitical, and institutional drivers of outward FDI contraction. A novel dataset covering 31 OECD countries and 16 manufacturing subsectors (Nomenclature of Economic Activities (NACE) Rev. 2) over 2013–2023 is assembled from harmonized international sources. Reshoring intensity is proxied by year-over-year declines in outward FDI flows, while key explanatory variables capture domestic automation (robot adoption), exposure to geopolitical and trade-related disruptions (novel geopolitical disruptions indicator), and sustainability performance (progress on Sustainable Development Goals (SDGs) 8, 9, 12, and 13). Estimates from panel random- and fixed-effects specifications, supplemented by instrumental variable techniques, show that automation and exposure to global disruptions are consistently associated with declines in outward FDI, reinforcing their role as key drivers of reshoring. Productivity also enters positively, though mainly as a control reflecting broader competitiveness effects. By contrast, sustainability alignment exhibits weaker and more context-dependent associations, reaching significance only in selected specifications. These findings provide integrated evidence on the structural forces reshaping international production and offer policy-relevant insights into the reconfiguration of global value chains. JEL Classification: F21, F23, O33, C23, C26