Effects of Offshore Production and R&D on Domestic Innovation Activities

Nobuaki Yamashita and Isamu Yamauchi

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: There has been a global shift in the distribution of manufacturing jobs and activities away from high-wage countries to low-wage countries for the past few decades. This paper examines a largely unexplored channel of the effects of offshore production on onshore (domestic) innovation performance. Controlling for the endogeneity, we find that increased offshore employment and R&D do not have positive impact on the domestic innovation measured by the number of patent applications and the number of forward citations on average. However, offshore R&D increases the quality of domestic innovation when the firms expand R&D function to the developed countries while it has a negative effect in the developing countries. We also find a synergistic effect between production and R&D activities. Therefore, separating the two activities can decrease the efficiency of resource allocation on the domestic innovation.

Pages: 26 pages
Date: 2019-09
New Economics Papers: this item is included in nep-ino, nep-int, nep-knm, nep-sbm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:19068

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