The neglected effects of R&D captive offshoring in emerging countries on the creation of knowledge at home

Research and Development (R&D) offshoring in emerging countries has increased greatly in the last decade. The literature on this topic has been mostly interested in the motivations and determinants, while the effects on home innovation have been less explored. Firms carry out most of their R&D at home and rely on a dispersed network of foreign R&D units embedded in different local contexts; however, although firms from advanced countries are the top investors in foreign R&D and emerging countries are top destinations, the effects of R&D captive offshoring in emerging countries on the creation of knowledge at home—i.e. on headquarter and home system of innovation in advanced countries—have been neglected. Based on the literature on the knowledge-based view of the firm and the reverse knowledge transfer (RKT), I discuss two possible effects, i.e. the “RKT-based division of labor” hypothesis and the “hollowing-out” hypothesis. I review the recent empirical evidence in support of either of the two hypotheses, and it emerges that positive effects are likely to occur, but also that there is a need for further empirical evidence. Copyright Associazione Amici di Economia e Politica Industriale 2015