Beyond the giants: the hidden role of micro and small enterprises in GVC reconfiguration dynamics

This paper analyzes the determinants and consequences of reshoring decisions among micro and small enterprises (MSEs) in the Italian fashion industry during the period 2008–2015, marked by the introduction and implementation of “Made-in” policies. Using administrative firm-level data from the Italian Ministry of Economy and Finance Annual Survey, the study compares MSEs that reshored production with those maintaining offshore outsourcing strategies. Findings indicate reshoring predominantly occurs among firms with limited capability endowments, suggesting this strategy often functions as a corrective response to previous misjudgments rather than a proactive strategic decision. Furthermore, evidence shows that reshoring does not yield benefits for MSEs; instead, firms that reshore exhibit persistent underperformance compared to those that maintain offshore operations. However, this negative impact is partially offset when reshoring occurs in regions characterized by dense subcontracting networks, highlighting the crucial role of local production systems in mitigating the challenges faced by reshoring MSEs. These results question the effectiveness of broad-based reshoring incentives linked to Made-in policies, underscoring the necessity for targeted, context-specific policy interventions.