Offshoring of intermediate production and firm-level innovationan empirical analysis

Resumen

Offshoring is a widespread practice nowadays and has been the subject of much scientific research. The effect of offshoring on factors such as costs, productivity, employment or wages has been extensively analyzed. Despite its importance, however, empirical research on the impact of offshoring on firm-level innovation has been scarce. Theoretical arguments predict contrasting effects. While some of the characteristics of the offshoring process may induce firm innovation, others might have deleterious consequences. Grounded on the resource-based view of the firm, and transaction cost theory we analyze the effect of the offshoring of intermediate production activities �either offshore outsourcing or captive offshoring� on firm-level innovation. Using data from 1,203 Spanish manufacturing firms from 2006 to 2009, we find a positive association between the offshoring of intermediate products and product innovation. Our results also show that the effect is positive for both captive offshoring and offshore outsourcing.