Abstract
A substantial amount of empirical research has been conducted on the offshoring/outsourcing practices of U.S., European, South Korean, and Japanese technology firms. However, there is very little research evidence on the strategies of Canadian firms. This leaves a gap in the literature that we aim to fulfill by providing empirical evidence of the practice among Canadian manufacturing firms. The evidence presented is based on t he 2009Survey of Innovation and Business Strategy conducted by Statistics Canada. This survey provides the largest and most comprehensive data in Canada on this topic. The data suggest that only a very small proportion of Canadian manufacturing firms offshore/outsource their R&D and other business activities and only a select few countries. The primary motivations for Canadian firms to offshore/outsource their R&D and business activities are to reduce costs and to gain access to new markets. The managerial, policy, and research implications of the results are discussed.
Highlights
The globalization of innovatory capacity by European and American multinational enterprises (MNEs) can be traced back to the early 1990s (Dunning, 1994; Athukorala & Kohpaiboon, 2010)
The offshoring and outsourcing of R&D, manufacturing, distribution and logistics and other business activities by MNEs, especially from the developed world has been increasing over the last two decades (Calantone and Stanko, 2007).This trend was greatly facilitated by several key factors including the rapid developments in information and communication technologies, technological sophistication and capabilities of key developing countries such as India and China, and increased transportation costs (Calantone and Stanko, 2007).Technological developments in information and communication technologies (ICTs) significantly reduced transaction costs associated with conducting high value-added R&D in foreign locations (Persaud et al 2002)
R&D was ranked 6th at virtually the same level with accounting and was only undertaken by between 25%, 33% and 40% of small, medium, and large firms.The results clearly indicate that the bulk of Canadian manufacturing firms perform their R&D at home rather than overseas and that most of the R&D conducted overseas is adaptive in nature since they are carried out in support of the overseas operations
Summary
The globalization of innovatory capacity by European and American multinational enterprises (MNEs) can be traced back to the early 1990s (Dunning, 1994; Athukorala & Kohpaiboon, 2010). As the R&D and innovation capabilities of foreign locations became more sophisticated, MNEs from the developed world began outsourcing R&D, manufacturing, and other business activities to firms and institutions in the developing world (e.g., India, China, South Korea, and Mexico) in order to capitalize on the relatively low costs for highly developed capabilities (Bardhan, 2006; Cantwell and Molero, 2003; Gerybadze and Reger, 1999). This trend is often described as outsourcing.offshoring and outsourcing are integral elements of a firm’s internationalization strategies. Section one provides a brief overview of the relevant literature, Section two describes the data, Section three presents the results, and Section four discusses the findings and offers the conclusion
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