Domestic R&D Employment Effects of Offshoring R&D Tasks: Some Empirical Evidence from Finland

This study empirically explores whether R&D offshoring affects the domestic R&D employment at the firm level. Overall, the Finnish survey data suggest that the impact of R&D internationalization on domestic R&D employment depends on the mode of internationalization (in-house offshoring vs. offshore outsourcing vs. in-house expansion of R&D abroad). Moreover, manufacturing and service firms are found to be different when it comes to R&D internationalization and its domestic employment effects. In the manufacturing sector, especially in-house offshoring of R&D has a significant negative impact on the plan to increase R&D employment. But the relationship between the in-house expansion of R&D abroad and domestic R&D employment turns out to be complementary. In the service sector, it is in the first place offshore outsourcing of R&D that has a significant negative impact on the plan to increase R&D employment. A final result supports the view that R&D does not always follow production but that a strong location link between production and R&D does have a significant negative effect on the domestic R&D employment.