Asymmetric additionalities between R&D outsourcing locations

This paper empirically examines the additionalities or crowding-out effects of international and national outsourcing of R&D to generate innovation. Using a panel database of about 10,000 Spanish firms for the period 2005-2014, we show that there is asymmetry in the effectiveness of the combined adoption of R&D outsourcing locations. International R&D outsourcing re-inforces the effect of domestic R&D outsourcing. However, national outsourcing does not re-inforce international R&D outsourcing. We next explore sources of additionality. Property Right Theory (PRT) suggests that additionality is high when holdup problems are low. We therefore analyze two important situations where holdup problems are likely to be low: with public foreign providers and in sectors with low technological complexity. Consistent with PRT, our results suggest that additionality is stronger when R&D is acquired from public providers rather than from private providers. Moreover, we find additionality in sectors with medium or low R&D complexity. In sectors with high R&D complexity, domestic and international outsourcing are largely independent. These results also suggest that international R&D outsourcing does not undermine domestic R&D.