Technological Capabilities, Technological Dynamism and Innovation Offshoring

31 Pages Posted: 14 Sep 2018

See all articles by Torben Schubert

Torben Schubert

Fraunhofer Institut für Systemtechnik und Innovationsforschung

Elisabeth Baier

ZEW – Leibniz Centre for European Economic Research

Christian Rammer

ZEW – Leibniz Centre for European Economic Research - Industrial Economics and International Management Research

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Date Written: June 15, 2016

Abstract

In this paper we analyze the conditions under which firms decide to offshore innovation. We consider the role of internal technological capabilities and technological dynamism in the firm environment, distinguishing speed and uncertainty of technological change. Using unique data from the German Innovation Survey we find that while high speed of technological change tends to drive innovation offshoring, high uncertainty about future technology developments results in more innovation offshoring only for firms with low internal technological capabilities. Firms with high technological capabilities instead are less likely to offshore innovation when uncertainty is high. We argue that these differences in offshoring behaviour reflect differing strategic objectives. We show that for firms with low technological capabilities asset augmentation is more important while for firms with high technological capabilities asset exploitation is more important. When faced by high technological uncertainty firms with low technological capabilities offshore innovation strategically in order to reduce uncertainty by augmenting their asset base. For firms with high technological capabilities asset augmentation is less important. When faced by high technological uncertainty they prefer to innovate onshore in order to keep stronger control of their key assets.

JEL Classification: O32, F21, F23, L22

Suggested Citation

Schubert, Torben and Baier, Elisabeth and Rammer, Christian, Technological Capabilities, Technological Dynamism and Innovation Offshoring (June 15, 2016). ZEW - Centre for European Economic Research Discussion Paper No. 44. Available at SSRN: https://ssrn.com/abstract=2804966 or http://dx.doi.org/10.2139/ssrn.2804966

Torben Schubert (Contact Author)

Fraunhofer Institut für Systemtechnik und Innovationsforschung ( email )

Breslauer Str. 48
Karlsruhe, 76139
United States

Elisabeth Baier

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Christian Rammer

ZEW – Leibniz Centre for European Economic Research - Industrial Economics and International Management Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

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