UNU-WIDER Research and Development (Re)location

The paper builds a framework for the analysis of research and development (R&D) offshoring and outsourcing that encompasses several strands of the economics literature. It surveys the predictions from key theoretical models advanced in the literature on international trade, foreign direct investment (FDI), economic geography, and innovation, and compares these with empirical evidence, at both country and firm level. The review first analyses the drivers and patterns of R&D (re)location, and the role played by knowledge spillovers in shaping such phenomena. It then looks at multinational firms’ strategic behaviour vis-à-vis the implications of their locational choices for both home and host countries, and accounts for the time dimension of such decisions. Finally it addresses the impact that north–south and south–north R&D flows might have on growth and development, and on the innovation capability of countries.