Innovation Offshoring with Fully Endogenous Growth

Colin Davis and Ken-ichi Hashimoto

ISER Discussion Paper from Institute of Social and Economic Research, Osaka University

Abstract: In recent years firms have started to offshore their innovation activities to emerging economies. This paper investigates the implications of innovation offshoring for productivity growth in a two-country framework that features a tension between access to technical knowledge and low-cost high-skilled labor in the innovation location decision. Industry and innovation tend to concentrate in the asset-wealthy country when trade costs are relatively high. A positive relationship between innovation costs and industry concentration then ensures that improved international knowledge diffusion coincides with an increase in net offshoring flows in innovation from the asset-wealthy country to the asset-poor country, and potentially with faster productivity growth.

Date: 2019-05
New Economics Papers: this item is included in nep-gro, nep-ino, nep-int, nep-sbm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:1055

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