The Effects of Production Offshoring on R&D and Innovation in the Home Country

Bernhard Dachs and Bernd Ebersberger

No V-001, FIW Research Reports series from FIW

Abstract: A strong innovation performance based on R&D, product development and the implementation of advanced production technologies is key for the long-term competitiveness of European economies. This study investigates the effects of production offshoring on R&D and innovation activities of the firm in the home country. The analysis is based on a dataset of more than 3000 manufacturing firms from seven European countries. We employ propensity score matching to compare R&D and innovation activities of firms which have offshored production activities in a previous period to a control group of non-offshoring firms. The analysis finds no negative effect of production offshoring on innovation and technological capabilities of firms in the home country. On contrary, offshoring firms spend significantly more on R&D or product design, and invest more in process innovation than non-offshoring firms. These results support a view on internationalisation of firms that regards offshoring as a strategy of international expansion, and not a passive reaction of firms to a loss of their competitiveness. Our results indicate that this expansion goes hand in hand with innovation and process modernization at home.

Keywords: offshoring; innovation; R&D; home country effects; investment (search for similar items in EconPapers)
JEL-codes: F23 F61 O31 O33 (search for similar items in EconPapers)
Pages: 44
Date: 2013-06
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Related works:
Journal Article: The effects of production offshoring on R&D and innovation in the home country (2015)
Working Paper: The effects of production offshoring on R&D and innovation in the home country (2014)
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