Abstract
In the growing literature on offshoring, little attention has been given to the impact on product innovation. In this paper we empirically investigate the connection between industry innovation and offshoring in manufacturing. Specifically, our focus is on how information flows to the US economy have been affected by the increase in manufacturing offshoring in the US automobile industry. We measure these knowledge spillovers using different aspects of patent data, namely foreign citations and inventor country of origin. Our results indicate that offshoring has resulted in increased knowledge spillovers to the USA, and that the quantity of such spillovers varies by country, with a positive spillover effect from offshoring to Mexico, China, South Korea and Taiwan, but little or no spillover effect from offshoring to Canada, Japan, Germany, France, Italy and the UK.
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