R&D offshoring and home industry productivity

Authors: Russell Thomson (Swinburne University) and Gaetan de Rassenfosse (EPFL)

We examine the conditions under which offshoring research and development (R&D) activities can benefit home country industry. The analysis uses comprehensive patent based indicator of R&D offshoring and considers industry-level data covering 2-digit manufacturing sectors across 18 OECD countries between 1981 and 2007. We tackle the issue of simultaneity by using R&D tax policy as an instrument for technology stock generated via offshoring. We propose a new approach to investigate the location that patented technology is applied, based on applicant filing behavior. The data suggest that technology seeking R&D offshoring contributes positively to industry productivity in the home country and that this effect is conditioned on whether the technology is applied in production in the firms operations in the home country.

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