The Lab and the Plant. Offshore R&D and Co-location with Production Activities

Two main forces drive the offshoring of R&D activities. On the one hand, the location decisions may be influenced by factors external to the firm. In order to gain access to external location factors, the firm may need to separate its activities along the value chain and geographically disperse these activities in different locations. On the other hand, the location of offshore R&D labs may be driven by the existence of internal (within-firm) linkages that motivate firms to co-locate them with production plants. This study relies on 6,235 R&D-related greenfield investments made by 2,756 MNEs over the period 2003-2015 in 1,625 cities around the world to investigates the the role of intra-firm linkages in the location of R&D. Results from a mixed logit model are consistent with a positive intra-firm co-location between offshored production and R&D activity, but with significant heterogeneity across firms. (with Katiuscia Lavoratori)