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Effects of Offshore Production and R&D on Domestic Innovation Activities


Nobuaki Yamashita | Royal Melbourne Institute of Technology
Isamu Yamauchi | Research Institute of Economy, Trade and Industry

Tokyo : Research Institute of Economy, Trade and Industry

24 pages
RIETI Discussion Paper Series ( 19-E-068 )



There has been a global shift in the distribution of manufacturing jobs and activities away from highwage countries to low-wage countries for the past few decades. This paper examines a largely unexplored channel of the effects of offshore production on onshore (domestic) innovation performance. Controlling for the endogeneity, we find that increased offshore employment and R&D do not have positive impact on the domestic innovation measured by the number of patent applications and the number of forward citations on average. However, offshore R&D increases the quality of domestic innovation when the firms expand R&D function to the developed countries while it has a negative effect in the developing countries. We also find a synergistic effect between production and R&D activities. Therefore, separating the two activities can decrease the efficiency of resource allocation on the domestic innovation.


>> 1. Introduction
>> 2. Related literature and hypothesis
>> 3. Identification strategy
>> 4. Data and variable construction
>> 5. Results
>> 6. Conclusion