Kenneth L. Kraemer Jason L. Dedrick University of California, Irvine
"This award is funded under the American Recovery and Reinvestment Act of 2009 (Public Law 111-5)."
Industry analysts predict that the current global economic crisis will speed up the offshoring of R&D such as new product development (NPD) and software development. Firms use development activities to create and bring new products to market, thereby stimulating economic growth. However, the modularity of the development process makes it possible to offshore (and/or outsource) more and more of these activities for cost and market advantage. Such shifts could be a threat to the success of current stimulus policies that rely heavily on innovation to drive growth and generate new jobs. It is important therefore to assess whether there is a sharp escalation in offshoring of innovation as a result of the economic crisis and, if so, the scale, scope and implications thereof. This project will replicate a survey of high-tech firms conducted in the fall of 2008, just before the steep economic decline of the fourth quarter of that year and well before the passage of the 2009 economic stimulus plan. The survey will be conducted in the fall of 2009 enabling us to capture offshoring effects as the recession has deepened and pressure for outsourcing has increased. Comparison of firms over time will capture the specific effects of the recession if more firms turn to this option as expected.
The intellectual merit of the research is that it will enable better understanding of the dynamics of offshoring under economic crisis. The current crisis has created a natural experiment wherein firms may increase their use or change their pattern of offshoring. By going back to these hi-tech firms, we will be able to identify important shifts created by the downturn, the factors shaping these shifts, and the implications for innovative activity. The broader impact of the research stems from the fact that the high-tech industry is a leading indicator of economic trends, so the results may signal a change in offshoring in the rest of the economy as well. Understanding these trends will provide important insights for policymakers and others concerned with U.S. innovation and economic performance.
