The Harvard Business Review published an article last year entitled “Choosing the United States.” It addresses how companies make decisions on where to locate their operations. There is an increasing trend of companies choosing to offshore their operations, which translates into jobs, investments, and economic growth for that country. Many of these decisions are based on the nation’s competitiveness. The U.S. is losing most of these location decisions due to U.S. policies distorting its economic potential. This means lost opportunities for job creation and improved wages for Americans.
In the previous generation, the main question when it came to location decisions focused on which country they wanted to serve. Now, 70% of surveyed HBS alumni responded that lower wages in the destination country was a leading reason to move out of the U.S. Only 34% responded that proximity to customers was a leading reason. The article details the causes behind this.
“For one, companies sometimes overlook or underestimate the hidden costs of locating activities outside the United States, as we heard in interviews we conducted with senior executives of multinationals. Many benefits of locating elsewhere, such as low wages or taxes, are visible and immediate, whereas the drawbacks are frequently subtle and apparent only over the long term. Also, companies often mistakenly view circumstances in U.S. locations as fixed, failing to consider how they might upgrade the productivity of existing U.S. sites or find more appropriate sites within America. Companies move out of U.S location when they could improve them.”
To access the full article, please visit hbr.org.