Governance Decision for R&D Offshoring Strategy Evidence from Taiwan-Based Firms

DOI: 10.5176/2251-1970_BizStrategy15.04

Authors: Yu Ching Wen and Wen-Bin Chuang

Abstract:The purpose of this study is to examine the governance decision for an R&D offshoring firm. Due to the specific feature of the mandate, which is highly dependent on the motivation in the host country, we further explain how R&D offshoring firms will choose their governance model (captive and outsourcing
mode) to enhance firm productivity between exploitation-orientation and exploration-orientation. This analysis takes advantage of the longitudinal dataset on Taiwan-based manufacturing firms for the period 2009-2012 and employs a propensity score matching of multinomial treatment method to estimate the causal effects, i.e., the average treatment effect on the treated. The empirical results show that not all firms have to behave in the same way. For exploitation-orientation firms outsourcing offshoring has a better impact on firm productivity, while captive mode is observed for exploration orientation firms.

Keywords:  Offshore R&D, Governance Decision, and Propensity Score Matching of Multinomial Treatment Method