Abstract
Offshoring research and development (R&D) invokes concerns regarding the loss of high value jobs and a hollowing out of technological capabilities, but can also benefit domestic firms by enabling them to tap into the global technological frontier. We study the effect of R&D offshoring on industrial productivity in the home country using a patent-based indicator and industry-level data for 18 OECD countries over a 26-year period. Simultaneity is addressed by using foreign tax policy as an instrument for offshored R&D. The results show that R&D offshoring contributes positively to productivity in the home country, irrespective of the host country destination.
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