This paper examines firm characteristics associated with the probability of relocating activities in a foreign country. Micro-level data for manufacturing firms for the period 1999–2005 shows that cost-cutting is the main determinant of offshoring production. The analysis reveals that firms with a higher research and development activity, larger firms and firms with greater labour intensity tend to be more involved in offshoring. We observe the prominence of foreign firms among those engaging in offshoring; our findings show that self-selection of the ‘best’ firms is much more significant in the case of foreign firms. For national firms, international experience is a key factor in the moving of production abroad.
JEL Classification code: F21, F23.