Measuring geopolitical distance: A quantitative approach to friendshoring in globalized supply chains

Globalized supply chains have generated tremendous benefits for firms across food and beverage markets, but geopolitical risk is introducing new vulnerabilities. One potential approach to mitigating these risks is through friendshoring, which involves strategically aligning supply chains with geopolitical allies. While some research indicates that this is occurring, a quantitative metric to empirically test this trend is lacking. This study uses country-level governance indicators from the World Bank to develop a dynamic and quantifiable measure of friendliness based on geopolitical distance. The metric is applied to 21,115 bilateral country combinations and varies over time to capture shifts in governing institutions, administrations, and other geopolitical events. To demonstrate a proof of concept, we analyze how the metric performs for the United States and assess its robustness relative to other measures. By creating and validating this measure, we aim to encourage future research that can provide policy-relevant and data-driven insights into the extent to which globalized supply chains have engaged in friendshoring.