IDEAS home Printed from https://ideas.repec.org/p/hst/ghsdps/gd10-185.html

Innovation and Production Offshoring: Implications on Welfare

Author

Listed:
  • Nuttapon Photchanaprasert

Abstract

I theoretically analyze the effects of a strengthening IPR protection and an improvement of technology of innovation of offshoring on the rate of innovation offshoring, rate of imitation, rate of innovation, relative wages, real wages and domestic welfare. A North-South dynamic general equilibrium model of trade with endogenous imitation and innovation and production offshoring is constructed. To trade with lower Southern wages, Northern firms confront the problem of information leakage to the Southern firms and monitoring costs if they do offshore innovation and production. The model predicts that a strengthening of IPR protection decreases the rate of innovation and the rate of imitation but increases the rate of innovation offshoring. Northern real wages also decrease with a strengthening of IPR protection but Southern real wages increase. It may hurt the North but benefit the South. An improvement in technology of innovation offshoring increases the rate of innovation, the rate of imitation and the rate of innovation offshoring. Northern relative real wages decrease with such improvement but Southern real wages increase. It may benefit the North and the South.

Suggested Citation

  • Nuttapon Photchanaprasert, 2011. "Innovation and Production Offshoring: Implications on Welfare," Global COE Hi-Stat Discussion Paper Series gd10-185, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hst:ghsdps:gd10-185
    as

    Download full text from publisher

    File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd10-185.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Alireza Naghavi & Gianmarco Ottaviano, 2009. "Offshoring and product innovation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(3), pages 517-532, March.
    2. Martin, Philippe & Ottaviano, Gianmarco I P, 2001. "Growth and Agglomeration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 947-968, November.
    3. Philippe Martin & Gianmarco I.P. Ottaviano, 2021. "Growing locations: Industry location in a model of endogenous growth," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 1, pages 3-24, World Scientific Publishing Co. Pte. Ltd..
    4. Amy Jocelyn Glass, 2004. "Outsourcing under Imperfect Protection of Intellectual Property," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 867-884, November.
    5. Ottaviano, Gianmarco & Naghavi, Alireza, 2006. "Outsourcing, Contracts and Innovation Networks," CEPR Discussion Papers 5681, C.E.P.R. Discussion Papers.
    6. Gao, Ting, 2005. "Foreign direct investment and growth under economic integration," Journal of International Economics, Elsevier, vol. 67(1), pages 157-174, September.
    7. Holger Görg & Aoife Hanley, 2011. "Services Outsourcing And Innovation: An Empirical Investigation," Economic Inquiry, Western Economic Association International, vol. 49(2), pages 321-333, April.
    8. Lee Branstetter & Raymond Fisman & C. Fritz Foley & Kamal Saggi, 2007. "Intellectual Property Rights, Imitation, and Foreign Direct Investment: Theory and Evidence," NBER Working Papers 13033, National Bureau of Economic Research, Inc.
    9. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(2), pages 190-207.
    10. Edwin Lai & Raymond Riezman & Ping Wang, 2009. "Outsourcing of innovation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(3), pages 485-515, March.
    11. Lai, Edwin L. -C., 1998. "International intellectual property rights protection and the rate of product innovation," Journal of Development Economics, Elsevier, vol. 55(1), pages 133-153, February.
    12. Sener, Fuat & Zhao, Laixun, 2009. "Globalization, R&D and the iPod Cycle," Journal of International Economics, Elsevier, vol. 77(1), pages 101-108, February.
    13. Masahisa Fujita & Jacques‐François Thisse, 2003. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Loses from It?," The Japanese Economic Review, Japanese Economic Association, vol. 54(2), pages 121-145, June.
    14. Amy Jocelyn Glassa & Kamal Saggi, 2023. "Innovation and wage effects of international outsourcing," World Scientific Book Chapters, in: Kamal Saggi (ed.), Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, chapter 2, pages 33-52, World Scientific Publishing Co. Pte. Ltd..
    15. Puga, Diego & Trefler, Daniel, 2010. "Wake up and smell the ginseng: International trade and the rise of incremental innovation in low-wage countries," Journal of Development Economics, Elsevier, vol. 91(1), pages 64-76, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Colin Davis & Ken-ichi Hashimoto, 2019. "Innovation Offshoring with Fully Endogenous Growth," ISER Discussion Paper 1055, Institute of Social and Economic Research, The University of Osaka.
    2. Sener, Fuat & Zhao, Laixun, 2009. "Globalization, R&D and the iPod Cycle," Journal of International Economics, Elsevier, vol. 77(1), pages 101-108, February.
    3. Colin Davis & Ken-ichi Hashimoto, 2016. "Innovation and Manufacturing Offshoring with Fully Endogenous Productivity Growth," Discussion Papers 1636, Graduate School of Economics, Kobe University.
    4. Chen, Hung-Ju, 2013. "Intellectual Property Rights and Skills Accumulation: A North-South Model of FDI and Outsourcing," MPRA Paper 45035, University Library of Munich, Germany.
    5. Chen, Hung-Ju, 2015. "Intellectual property rights and skills accumulation: A product-cycle model of FDI and outsourcing," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 328-343.
    6. Tetsugen Haruyama & Ken-ichi Hashimoto, 2020. "Innovators and imitators in a world economy," Journal of Economics, Springer, vol. 130(2), pages 157-186, July.
    7. Colin Davis & Ken‐ichi Hashimoto, 2023. "Innovation offshoring and reshoring with fully endogenous growth," Southern Economic Journal, John Wiley & Sons, vol. 90(1), pages 90-120, July.
    8. Debasis Mondal & Manash Ranjan Gupta, 2006. "Product development, imitation and economic growth: A note," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(1), pages 27-48.
    9. Chen, Hung-Ju, 2019. "Innovation and FDI: Does the Target of Intellectual Property Rights Matter?," MPRA Paper 94692, University Library of Munich, Germany.
    10. Hitoshi Tanaka & Tatsuro Iwaisako, 2009. "Product cycles, endogenous skill acquisition, and wage inequality," Canadian Journal of Economics, Canadian Economics Association, vol. 42(1), pages 300-331, February.
    11. Baldwin, Richard E. & Martin, Philippe, 2004. "Agglomeration and regional growth," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 60, pages 2671-2711, Elsevier.
    12. Karima Kourtit & Peter Nijkamp, 2013. "In Search Of Creative Champions In High-Tech Spaces: A Spatial Application Of Strategic Performance Management," Journal of Regional Science, Wiley Blackwell, vol. 53(5), pages 749-777, December.
    13. Grieben, Wolf-Heimo & Şener, Fuat, 2017. "Wage bargaining, trade and growth," Research in Economics, Elsevier, vol. 71(3), pages 564-587.
    14. Stadler, Manfred, 2015. "Innovation, industrial dynamics and economic growth," University of Tübingen Working Papers in Business and Economics 84, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    15. Murata, Yasusada, 2008. "Engel's law, Petty's law, and agglomeration," Journal of Development Economics, Elsevier, vol. 87(1), pages 161-177, August.
    16. Karima Kourtit & Peter Nijkamp, 2013. "In Search of Creative Champions in High-Tech Spaces," Tinbergen Institute Discussion Papers 13-193/VIII, Tinbergen Institute.
    17. Colin Davis & Alireza Naghavi, 2011. "Offshoring Production: A Simple Model Of Wages, Productivity, And Growth," Economic Inquiry, Western Economic Association International, vol. 49(2), pages 334-348, April.
    18. Cerina, Fabio & Mureddu, Francesco, 2014. "Is agglomeration really good for growth? Global efficiency, interregional equity and uneven growth," Journal of Urban Economics, Elsevier, vol. 84(C), pages 9-22.
    19. Breinlich, Holger & Ottaviano, Gianmarco I.P. & Temple, Jonathan R.W., 2014. "Regional Growth and Regional Decline," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 683-779, Elsevier.
    20. Edwin L.-C. Lai, 2008. "Globalization of production and the technology transfer paradox," Working Papers 0810, Federal Reserve Bank of Dallas.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hst:ghsdps:gd10-185. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tatsuji Makino (email available below). General contact details of provider: https://edirc.repec.org/data/iehitjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.