Effects of Production Offshoring on Innovation

Last week we received the good news that the paper “The Effects of Production Offshoring on R&D and Innovation in the Home Country” by myself, Bernhard Dachs, Steffen Kinkel and Oliver Som will be published by the Journal of Industrial and Business Economics.

In the paper we test the commonly held assumption that offshoring of production activities leads to less innovation in the home country. The analysis is based on a dataset of more than 3000 manufacturing firms from seven European countries. We find that offshoring firms employ more people in R&D and design, introduce more frequently new products, and invest more frequently in advanced process technologies compared to non-offshoring firms. Concerns that offshoring may hurt innovation because of the lost links between production and product development are not supported by the evidence.