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Too much or too little of R&D offshoring: The impact of captive offshoring and contract offshoring on innovation performance

Philip J. Steinberg, Vivien Procher () and Diemo Urbig

Research Policy, 2017, vol. 46, issue 10, 1810-1823

Abstract: Innovating firms may acquire foreign knowledge and improve their innovation performance by offshoring their R&D activities to their own foreign affiliates (captive offshoring) as well as by contracting out their R&D to external foreign parties (contract offshoring). This study examines the impact of both R&D offshoring strategies on innovation performance. Based on a panel dataset of 2421 R&D-active firms in Germany, we demonstrate that captive offshoring and contract offshoring differ fundamentally in their impact on firm innovation performance. At low degrees of offshoring, contract offshoring positively affects innovation performance and is preferable over captive offshoring. At larger degrees of offshoring, captive offshoring becomes more beneficial while contract offshoring is disadvantageous. Both offshoring strategies eventually harm innovation performance when excessively employed. Furthermore, the R&D offshoring-performance relationship is leveraged by R&D intensity, such that firms with a larger knowledge stock benefit stronger from both captive and contract offshoring.

Keywords: R&D offshoring; Innovation; Contract offshoring; Captive offshoring; R&D intensity (search for similar items in EconPapers)
JEL-codes: O32 F23 M16 (search for similar items in EconPapers)
Date: 2017
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Research Policy is currently edited by M. Bell, B. Martin, W.E. Steinmueller, A. Arora, M. Callon, M. Kenney, S. Kuhlmann, Keun Lee and F. Murray

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