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Offshoring of R&D: Looking abroad to improve innovation performance

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Abstract

The offshoring of knowledge services has become a phenomenon of increasing importance for firms, but many of its implications are yet to be discussed thoroughly. This paper analyzes whether R&D offshoring contributes to enhancing firms’ innovation capabilities. Specifically, the study distinguishes between two governance models of offshoring – captive offshoring and offshore outsourcing – and two types of innovation outcomes – product and process innovations. We suggest that R&D offshoring has different impacts, depending on the innovation results and governance models considered. The study empirically tests these relationships using the Spanish Technological Innovation Panel. This survey contains information on a large sample of firms from diverse sectors for the period 2004–2007. The empirical findings allow us confirm our hypotheses, and highlight the strategic importance of R&D offshoring. The empirical evidence reveals a positive relation between offshoring and innovation performance, with a greater effect on product than on process innovations. The results for different governance models show that captive offshoring has a greater effect on innovation outcomes than offshore outsourcing. These findings lead us to conclude that firms that look overseas can benefit from location-specific and specialization advantages to improve innovation performance.

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Notes

  1. As robustness checks, we re-estimated two additional separate analyses. Specifically, we performed: (1) an analysis including all the variables in contemporary terms; (2) an analysis including two lag period variables. In all the analyses, we found substantially similar results. These results are available from the authors on request.

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Acknowledgements

We thank the Consulting Editor, Professor Arie Y. Lewin, and the three anonymous reviewers for their helpful comments and suggestions. The manuscript has also benefited from the comments by participants and reviewers of the 35th EIBA Annual Conference on an earlier version of this paper. This study has been partially supported by financial aid from the Spanish Ministry of Education and Science, with the Project ECO2008-01513. This research is part of the second author's doctoral dissertation, which is supervised by the first author. Authors appear in alphabetical order.

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  1. Business Management Division, University Carlos III of Madrid, Madrid, Spain

    María Jesús Nieto & Alicia Rodríguez

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  1. María Jesús Nieto
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Correspondence to Alicia Rodríguez.

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Accepted by Arie Y. Lewin, Consulting Editor, 6 September 2010. This paper has been with the authors for two revisions.

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Nieto, M., Rodríguez, A. Offshoring of R&D: Looking abroad to improve innovation performance. J Int Bus Stud 42, 345–361 (2011). https://doi.org/10.1057/jibs.2010.59

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