Foreign Direct Investment, R&D Mobility and the New Economic Geography: A Survey


  • The authors are grateful to James Markusen for valuable discussions on a previous version of this paper. We also thank Heloisa Marone and participants at UNU-WIDER's conference ‘Southern Engines of Global Growth: Financial Flows and Capital Markets’, held in Rio de Janeiro on 11–12 July 2008 for helpful comments. This work was mainly carried out while Mariagrazia Squicciarini was at VTT Technical Research Centre of Finland, and Amelia U. Santos-Paulino at UNU-WIDER in Helsinki, Finland. Mariagrazia Squicciarini acknowledges the financial support of Tekes, the Finnish Technology Agency (Grant number 40254/06). The opinions expressed in this article are those of the author and do not necessarily reflect the official views of the Organisation for Economic Co-operation and Development (OECD), the United Nations Conference on Trade and Development (UNCTAD), or of the governments of its member countries. The usual caveats apply.


This paper surveys several strands of the economics literature focusing on the international mobility of FDI in general, and the offshoring and outsourcing of R&D activities in particular. The paper outlines key findings, identifies common features and existing divergences and addresses the relevant research gaps emerging from the R&D offshoring and outsourcing literatures. The aim is to investigate the main drivers of R&D (re)location and the possible impact that the offshoring and outsourcing of R&D activities might have on the competitiveness and growth of both firms and countries. Factor price differences, trading costs, countries' size and openness, relative skill endowments, productivity differentials, completeness and enforceability of contracts, knowledge production and spillovers and IPR regimes all shape foreign sourcing and the specific R&D location patterns that emerge. The overall impact of offshoring and outsourcing in general—and of R&D in particular—cannot be seen in isolation, as it is part of more complex globalisation dynamics.