Global sourcing in innovation. Chuen-Yueh Li

ISBN: 9780549899716

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NOOKstudy eTextbook

92 pages


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Global sourcing in innovation.  by  Chuen-Yueh Li

Global sourcing in innovation. by Chuen-Yueh Li
| NOOKstudy eTextbook | PDF, EPUB, FB2, DjVu, AUDIO, mp3, RTF | 92 pages | ISBN: 9780549899716 | 4.21 Mb

Economists, including Paul Samuelson and Jagdish Bhagwati, vigorously debate whether offshore outsourcing in high-tech industries helps or harms the U.S. economy. The main issue is whether insourcing countries, such as China and India, will catch upMoreEconomists, including Paul Samuelson and Jagdish Bhagwati, vigorously debate whether offshore outsourcing in high-tech industries helps or harms the U.S. economy. The main issue is whether insourcing countries, such as China and India, will catch up with and eventually outcompete the U.S.

Moreover, the dearth of offshore outsourcing data has hindered the study of the impact of offshore outsourcing. To explore the impact of offshore outsourcing, I examine how the heterogeneity of offshore outsourcing demand affects insourcing firms innovation choices and how these innovation choices connect with their industrys technology-driven productivity growth. This paper contributes to our understanding of offshore outsourcing in several vital ways: First, I collect firm-level data of offshore outsourcing in IT hardware industries, a type of data that was previously nonexistent but sorely needed to deepen our understanding.

Second, my empirical results show that the rise of offshore outsourcing, especially outsourcing in R&D activities, does help our overseas partners gain technology-driven productivity growth and hence narrows the technology gap between firms in outsourcing countries and in insourcing countries. This result offers some support for Samuelsons negative view that offshore outsourcing enhances Chinese productivity growth in the IT industry, with subsequent adverse impacts on the U.S. economy.

Adverse effects, however, still depend on market forces behind the identified asymmetric holdup problem between outsourcing and insourcing firms. Third, this dissertation goes beyond the debate by proving the existence of a virtuous cycle between offshore outsourcing demand and insourcing firms technological expertise. This cycle explains why U.S. IT firms are increasingly outsourcing innovation overseas. Furthermore, the speed of the cycle clearly indicates the dynamic nature of comparative advantage.

Finally, several findings challenge Vernons views on product cycle and its implied trade patterns. In fact, advanced countries no longer hold monopoly on innovation. These results have policy implications regarding technological progress, international skilled labor mobility in new industries, and trade with China and India.



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