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Innovation offshoring and outsourcing: what are the implications for industrial policy?

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  • Dieter Ernst

Abstract

This paper examines how innovation offshoring through global innovation networks affects Industrial Upgrading (IU) policies in Asia's electronics industry. I argue that developing countries cannot build their innovative capabilities by solely relying on their national innovation systems. For quite some time, these countries will have to draw primarily on foreign sources of knowledge as a catalyst for learning and capability formation. The paper discusses generic policy issues that host countries need to address to maximise the benefits of innovation offshoring. To leverage the potential benefits from global network integration, host countries must have in place vigorous policies to reduce the potentially high costs that may result from 'brain drain' (both domestic and international) when Trans-National Corporations (TNCs) are crowding out the local market for scarce skills, from the acquisition by TNCs of innovative local companies and from a potential deterrence effect of TNC labs on local R&D. I emphasise the critical importance of policies to develop strong local companies that can act as countervailing forces.

Suggested Citation

  • Dieter Ernst, 2008. "Innovation offshoring and outsourcing: what are the implications for industrial policy?," International Journal of Technological Learning, Innovation and Development, Inderscience Enterprises Ltd, vol. 1(3), pages 309-329.
  • Handle: RePEc:ids:ijtlid:v:1:y:2008:i:3:p:309-329
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    References listed on IDEAS

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    1. Fosfuri, Andrea & Motta, Massimo & Ronde, Thomas, 2001. "Foreign direct investment and spillovers through workers' mobility," Journal of International Economics, Elsevier, pages 205-222.
    2. Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Restructuring and productivity growth in uk manufacturing," Economic Journal, Royal Economic Society, vol. 113(489), pages 666-694, July.
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    6. Gorg, Holger & Strobl, Eric, 2001. "Multinational Companies and Productivity Spillovers: A Meta-analysis," Economic Journal, Royal Economic Society, vol. 111(475), pages 723-739, November.
    7. Anabel Marin & Martin Bell, 2006. "Technology spillovers from Foreign Direct Investment (FDI): the active role of MNC subsidiaries in Argentina in the 1990s," Journal of Development Studies, Taylor & Francis Journals, vol. 42(4), pages 678-697.
    8. Takii, Sadayuki, 2005. "Productivity spillovers and characteristics of foreign multinational plants in Indonesian manufacturing 1990-1995," Journal of Development Economics, Elsevier, pages 521-542.
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    Cited by:

    1. Lema, Rasmus & Quadros, Ruy & Schmitz, Hubert, 2015. "Reorganising global value chains and building innovation capabilities in Brazil and India," Research Policy, Elsevier, pages 1376-1386.
    2. Lema, Rasmus, 2010. "Adoption of Open Business Models in the West and Innovation in India's Software Industry," MPRA Paper 49589, University Library of Munich, Germany.

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