Outsourcing: Volume and Composition of R&D
20 Pages Posted: 7 Oct 2010 Last revised: 10 Oct 2010
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Outsourcing: Volume and Composition of R&D
Date Written: October 7, 2010
Abstract
This paper examines the impact of outsourcing of production on the volume and composition of home country’s research and development. We find that outsourcing decreases process R&D of the multinational firm in large markets when it only conducts process R&D (the substitution effect between outsourcing and process R&D). Outsourcing tends to emerge as a complementary factor to product development when the multinational firm conducts both product R&D and process R&D (the complementary effect between outsourcing and product R&D) under some conditions. This implies that international outsourcing has a different effect on product innovation and process innovation.
Keywords: Outsourcing, Product R&D, Process R&D
JEL Classification: D23, F12, L22, O31, O33
Suggested Citation: Suggested Citation
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