Offshoring, Product Scope and Firm Performance

This chapter explores how the extent of offshoring production affects innovation by multinational multiproduct firms. Looking at both product and process innovation, we are able to make conclusions about the endogenous performance of firms in terms of productivity and product scope. Our argument focuses on the nature of spillovers made possible through multinational production and multiproduct activities. We find that product differentiation among a firm’s product line is a decisive factor in determining whether offshoring production can be advantageous or detrimental for firm performance.