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Why are Companies Offshoring Innovation? The Emerging Global Race for Talent
- Journal of International Business Studies
, 2009
"... This paper empirically studies determinants of decision by companies to offshore innovation activities. It uses survey data from the international Offshoring Research Network project to estimate the impact of managerial intentionality, past experience, and environmental factors on the probability of ..."
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Cited by 53 (8 self)
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This paper empirically studies determinants of decision by companies to offshore innovation activities. It uses survey data from the international Offshoring Research Network project to estimate the impact of managerial intentionality, past experience, and environmental factors on the probability of offshoring innovation projects. The results show that the emerging shortage of highly skilled science and engineering talent in the US and, more generally, the need to access qualified personnel are important explanatory factors for offshoring innovation decisions. Moreover, contrary to drivers of many other functions, labor arbitrage is less important than other forms of cost savings. The paper concludes with a discussion of the changing dynamics underlying offshoring of innovation activities, suggesting that companies are entering a global race for talent.
Distributed R&D, cross-regional knowledge integration and quality of innovative output
- Research Policy
, 2008
"... Ivo Zander, Minyuan Zhao, three anonymous referees and participants in the Singapore Strategy Seminar Series, AIB annual meetings, DRUID summer conference and AOM annual meetings for comments. I also thank Peter Thompson, Nick Argyres and Brian Silverman for sharing their data with me. Finally, I am ..."
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Cited by 26 (2 self)
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Ivo Zander, Minyuan Zhao, three anonymous referees and participants in the Singapore Strategy Seminar Series, AIB annual meetings, DRUID summer conference and AOM annual meetings for comments. I also thank Peter Thompson, Nick Argyres and Brian Silverman for sharing their data with me. Finally, I am grateful to INSEAD for funding this research. Errors remain my own. We explore the impact of geographic dispersion of a firm’s R&D activities on the quality of its innovative output. Using data on over half a million patents from 1,127 firms, we find that having geographically distributed R&D per se does not improve the quality of a firm’s innovations. In fact, distributed R&D appears to be negatively associated with average value of innovations. This suggests that potential gains from access to diverse ideas and expertise from different locations are, on average, offset by difficulty in achieving integration of knowledge across multiple locations. To investigate whether the innovating teams that do manage cross-fertilization of ideas from different locations achieve more valuable innovations, we analyze innovations for which there is evidence of such knowledge cross-fertilization along any of the followings dimensions: knowledge sourcing from other locations within the firm, having at least one inventor with cross-regional ties, and having at least one inventor that has
Firm- and country-level tradeoffs and contingencies in the evaluation of foreign investment: The semiconductor industry
- Organization Science
, 1994
"... doi 10.1287/orsc.1040.0091 ..."
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R&D co-practice and “reverse” knowledge integration in multinational firms
- Journal of International Business Studies
, 2005
"... This paper contributes to the developing literature on the management of distributed innovation in multinational firms. We focus on a specific organiza-tional mechanism, R&D co-practice, which we believe is an important facilitator of knowledge integration in multinationals with global innovatio ..."
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Cited by 22 (0 self)
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This paper contributes to the developing literature on the management of distributed innovation in multinational firms. We focus on a specific organiza-tional mechanism, R&D co-practice, which we believe is an important facilitator of knowledge integration in multinationals with global innovation strategies. In our formulation, R&D co-practice (joint technical activities between units) increases levels of absorptive capacity and social capital among participating units, thus increasing the likelihood that they will share knowledge at future time periods. We find strong support for this hypothesis through an empirical analysis of ‘reverse ’ (subsidiary to headquarters) knowledge integration in two sectors – automotive and pharmaceuticals – over a 21-year period.
Emerging Markets as Learning Laboratories: Learning
- Behaviors of Local Firms and Foreign Entrants in Different Institutional Contests." Management and Organization Review
, 2005
"... In this work, we examine and integrate the research streams on learning behaviours of both local firms and foreign entrants in emerging markets. We propose that local firms and foreign entrants differ in the types of learning pursued and in the learning processes used. While emerging market firms ..."
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Cited by 13 (2 self)
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In this work, we examine and integrate the research streams on learning behaviours of both local firms and foreign entrants in emerging markets. We propose that local firms and foreign entrants differ in the types of learning pursued and in the learning processes used. While emerging market firms engage in a significant amount of exploratory learning, they also attempt to exploit the newly gained knowledge in their current markets. Furthermore, foreign entrants engage in exploitative learning as expected but also must participate in exploratory learning to acquire knowledge of culture, institutional norms, and important social relationships. While much of the learning occurs through cooperative processes with both partners, they also each engage in experiential learning. We argue that emerging markets also differ; firms in the more mature emerging markets seek different types of learning and the learning processes used vary compared to those in less mature emerging markets. Our research suggests that emerging markets represent learning laboratories and provide a base to catalyse future research. Recent research has increasingly focused attention on emerging markets. Emerg-
2004): “Multinational firms and knowledge diffusion: evidence using patent citation data.” INSEAD working paper
"... Thompson, Manuel Trajtenberg and seminar participants at various universities and conferences for helpful How actively do local subsidiaries of foreign MNCs exchange knowledge with their host countries? To what extent does this facilitate cross-border knowledge diffusion between the MNC home base an ..."
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Cited by 9 (1 self)
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Thompson, Manuel Trajtenberg and seminar participants at various universities and conferences for helpful How actively do local subsidiaries of foreign MNCs exchange knowledge with their host countries? To what extent does this facilitate cross-border knowledge diffusion between the MNC home base and the host country? To address these issues, I use over one million patent citations to analyze micro-level knowledge flows in six most innovating countries. I find that there are significant bi-directional knowledge flows between MNCs and their host countries, but that MNCs gain more than they contribute. The pattern varies across countries and sectors, depending on the knowledge-intensity of FDI.
Arms race or détente? How interfirm alliance announcements change the stock market valuation of rivals
- Management Science
, 2009
"... M ost prior event studies find that the announcement of a new alliance is accompanied by a positive stock market response for the partners. This result has usually been interpreted as evidence for the prevailing view that alliances are effective vehicles for partners to acquire or access new skills ..."
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Cited by 7 (0 self)
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M ost prior event studies find that the announcement of a new alliance is accompanied by a positive stock market response for the partners. This result has usually been interpreted as evidence for the prevailing view that alliances are effective vehicles for partners to acquire or access new skills and thus become stronger competitors. However, partners should also earn positive abnormal returns if alliances are used to shape competitive interactions, attenuating competitive intensity industry-wide. In this study, we disentangle these different mechanisms by examining how alliance announcements affect the stock market's evaluation of allying firms' rivals: if an alliance is expected to make partner firms more competitive, this should lead to negative abnormal returns for partners' rivals; if an alliance is expected to facilitate a reduction in competitive intensity, this should lead to positive abnormal returns for rivals. Results from an event study analysis of research and development alliances in the telecommunications and electronics industries during 1996-2004 provide evidence consistent with competition attenuation in some alliances. Our research thus challenges the increasingly narrow focus on learning and resource accumulation through alliances, and calls for broader consideration of the roles and effects of collaboration, both for individual firms and for industry structure.
How does Knowledge Transfer from Foreign Subsidiaries affect Parent Companies ’ Innovative Capacity?
, 2006
"... The paper addresses reverse knowledge transfer (RKT) from foreign subsidiary to parent company. Specifically, it aims at investigating to what extent the effectiveness of such a transfer is influenced by: (i) the organizational mechanisms employed for transferring knowledge; (ii) the subsidiary’s ro ..."
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Cited by 7 (0 self)
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The paper addresses reverse knowledge transfer (RKT) from foreign subsidiary to parent company. Specifically, it aims at investigating to what extent the effectiveness of such a transfer is influenced by: (i) the organizational mechanisms employed for transferring knowledge; (ii) the subsidiary’s role, its autonomy, and its relationships with the local context. The empirical analysis considers 162 transfers of best practices possessed by foreign subsidiaries and transferred back to their Italian parent companies. Results confirm that the impact of RKT on the parent company’s innovativeness is greater when: (i) person-based mechanisms are employed for transferring knowledge; (ii) subsidiaries are competence-creating; and (iii) knowledge developed by subsidiaries benefits from local external linkages. Key words: External linkages, organizational mechanisms, parent company’s innovativeness, reverse knowledge transfer, subsidiary’s characteristics.
International Knowledge Sourcing: Evidence from US Firms Expanding Abroad
- Strategic Management Journal
, 2008
"... Recent research demonstrates that firms, motivated by national differences in technical activity, expand abroad to source unique knowledge. Extant research suggests that firms use a knowledge sourcing strategy to ‘catch up ’ with competitors and to obtain ‘technical diversity. ’ We widen the investi ..."
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Cited by 6 (0 self)
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Recent research demonstrates that firms, motivated by national differences in technical activity, expand abroad to source unique knowledge. Extant research suggests that firms use a knowledge sourcing strategy to ‘catch up ’ with competitors and to obtain ‘technical diversity. ’ We widen the investigation by suggesting that firms also use knowledge sourcing as a springboard to reduce their next generation R&D costs–that firms would seek out similar R&D activity to combine with their own. Using unique data that encompasses the multitude of countries where U.S. firms invest, we test the importance of these explanations. Measuring knowledge via patent stocks, we find that country-industries with larger stocks and greater technical similarity to the United States are more attractive. These findings suggest that an important explanation for firms investing abroad is not catching up or technologically diversifying, but is using similar R&D efforts of others to overcome fixed R&D cost hurdles. Copyright 2008 John Wiley & Sons, Ltd.
Multinational Firms and International Knowledge Diffusion: Evidence using Patent Citation Data
, 2003
"... Abstract: This paper addresses three questions: (i) Are multinational firms (MNCs) really better than markets at transferring knowledge across borders? (ii) How actively do MNCs exchange knowledge with their host countries? (iii) Do they contribute as much to local knowledge as they learn from their ..."
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Cited by 4 (0 self)
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Abstract: This paper addresses three questions: (i) Are multinational firms (MNCs) really better than markets at transferring knowledge across borders? (ii) How actively do MNCs exchange knowledge with their host countries? (iii) Do they contribute as much to local knowledge as they learn from their host countries? To answer these questions, I analyze data on citations for over half a million patents from 4,400 firms and organizations from six countries, covering all manufacturing sectors. I estimate the probability of individual knowledge flows, as measured using patent citations, through a weighted maximum likelihood estimation approach for choice-based samples. Cross-border knowledge flows within the same MNC are found to be several times stronger than those between different entities even within the same country. Interestingly, these intra-MNC flows are equally strong in both directions between the home base and the foreign subsidiaries. Turning to intra-national knowledge flows, foreign MNC subsidiaries learn more from domestic entities than they contribute to host country knowledge, though this pattern differs across countries and industries. Knowledge flows from host countries to MNCs are in fact as strong as those between domestic entities, showing that MNC subsidiaries are not disadvantaged by their foreign affiliation. Finally, parent firms of MNCs with a higher fraction of innovative activity located abroad also learn more from other countries, suggesting
