Outsourcing: Volume and Composition of R&D
University of Texas at San Antonio - College of Business - Department of Economics
Centre for Studies in Social Sciences, Calcutta; City University of Hong Kong (CityUHK) - Department of Economics & Finance
Hong Kong Polytechnic University
October 7, 2010
This paper examines the impact of outsourcing of production on the volume and composition of home country’s research and development. We find that outsourcing decreases process R&D of the multinational firm in large markets when it only conducts process R&D (the substitution effect between outsourcing and process R&D). Outsourcing tends to emerge as a complementary factor to product development when the multinational firm conducts both product R&D and process R&D (the complementary effect between outsourcing and product R&D) under some conditions. This implies that international outsourcing has a different effect on product innovation and process innovation.
Number of Pages in PDF File: 20
Keywords: Outsourcing, Product R&D, Process R&D
JEL Classification: D23, F12, L22, O31, O33
Date posted: October 7, 2010 ; Last revised: October 10, 2010
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