Talent, Geography, and Offshore R&D

Jingting Fan

The Review of Economic Studies, 2025, vol. 92, issue 2, 1022-1060

Abstract: I model and quantify the impact of a new dimension of globalization: offshore R&D. In the model, firms employ researchers across the globe to develop new product blueprints and then engage in offshore production and exporting. Frictions impeding trade and the separation of production from R&D lead to a “market-access” motive for offshore R&D, while cross-country differences in the distributions of firm knowhow and worker ability generate a “talent-acquisition” motive. I discipline the model using empirical facts derived from a new firm-level dataset. Counterfactual experiments show that the two motives can account for a significant portion of the observed offshore R&D. Incorporating offshore R&D amplifies the gains from globalization by a factor of 1.3 and generates new implications for the impacts of traditional forms of global integration, namely trade and multinational production.

Keywords: Multinational firms; Offshore R&D; Global value chain; Gains from openness (search for similar items in EconPapers)
Date: 2025
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