National concerns are occasionally raised against offshoring economic activities to other countries. While most of the existing literature has focused on the effects on labour demand and productivity, the effects on domestic R&D have largely been neglected. Using Swedish firm-level data, we analyse the effects of material offshoring on the R&D intensity of domestic firms. The results suggest that the overall impact of offshoring on R&D is negative. The negative effect on home country R&D stems from offshoring by small firms from other high-income countries. Conversely, offshoring increases home country R&D among large firms. As large firms perform the bulk of Swedish R&D, the net effect of offshoring on R&D is positive.
Related content: Working Paper No. 180
Karpaty, P. & Gustavsson Tingvall, P. (2015). Offshoring and Home Country R&D. The World Economy, 38(4), 655-676. DOI: 10.1111/twec.12226