R&D Offshoring and Home Industry Productivity
41 Pages Posted: 21 Jul 2016 Last revised: 21 Dec 2018
Date Written: December 2018
Offshoring R&D commonly invokes concerns regarding the loss of high value jobs and a hollowing out of technological capabilities, but it can also benefit domestic firms by enabling them to tap into the global technological frontier. We study the effect of R&D offshoring on industrial productivity in the home country using industry-level data for 18 OECD countries over a 26-year period. Simultaneity between productivity and R&D offshoring is addressed by using foreign tax policy as an instrument for offshored R&D. We show that R&D offshoring contributes positively to productivity in the home country, irrespective of the host country destination.
Keywords: R&D offshoring, globalization, productivity, foreign R&D
JEL Classification: F23, F62, O25, O33, O47, L6
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