The challenge of R&D offshoring: Implications for firm productivity

Abstract

R&D offshoring has been gaining in importance in recent years. Nevertheless, there is as yet a very limited understanding of its implications for firms. This chapter analyzes the potential benefits the offshoring of R&D may have on productivity. We distinguish between two governance modes—captive offshoring and offshore outsourcing, and we analyze their direct and indirect effects through innovation. The empirical analysis is based on an extensive sample of Spanish firms in the manufacturing and services sectors covering the 2004–2007 period. Our results enable us to conclude that offshore outsourcing has a positive impact—both directly and indirectly—on productivity. In turn, captive offshoring has a positive impact on productivity, which is observed insofar as the firm innovates. This research reveals the importance not only of R&D offshoring strategies but also of the choice of one or other governance mode according to a firm's specific goals.