Determinants of International R&D Outsourcing: The Role of Trade

Abstract

This paper investigates the determinants of international R&D outsourcing, in particular the role of trade. We construct a monopolistic competition model with heterogeneous firms where outsourcing increases a firm’s fixed transaction as well as its productivity. Financial constraints affect the decision to outsource R&D more to non-exporters than to exporters. In contrast, exporters are more sensitive to a lack of information because they have higher losses when there is technology leakage. We test these predictions using a panel database of Spanish companies. The results highlight the relevance of information in competitive markets, and the role of trade to induce companies to engage in other globalization strategies.