Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/301867 
Year of Publication: 
2024
Series/Report no.: 
ZEW Discussion Papers No. 24-056
Publisher: 
ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung, Mannheim
Abstract: 
We study the implications of services trade for firm innovation. Using a quasi-experimental shift-share design, we find that access to foreign knowledge-related services improves the innovativeness of domestic firms and complements their indigenously sourced R&D. To confront this evidence, we develop a theoretical model. It demonstrates outsourcing can foster firms' innovation efficiency by mitigating decreasing economies of scale in in-house innovation efforts. As a result, firms become more likely to outsource innovation efforts as they become more innovative, whereas the prevalence of offshoring depends on its associated trade costs.
Subjects: 
International integration
Service trade
Firm innovation
JEL: 
F14
F15
F23
O31
O32
Document Type: 
Working Paper

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