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US offshore outsourcing of R&D: Accommodating firm and national competitiveness perspectives

Summary In the United States (US), the policy debate surrounding offshore outsourcing of ‘white collar’ service jobs, many of them high-paying, professional and technical positions, has recently focused on an area having potentially serious consequences for America’s long-term national competitiveness: the business strategy of off-shoring firm research and development (R&D) activities of critically important industries, such as information technology (IT) and pharmaceuticals. The author argues that, from a business perspective, an effective R&D offshore outsourcing strategy embraces an ‘Open Innovation’ approach, which emphasizes a careful balance between retaining core internal R&D capabilities while leveraging formal, collaborative technology relationships that enhance new product development and protect the corresponding intellectual property. US public policy complements this private sector strategy by establishing a foundation for improving the technological capabilities of the citizenry, restricting technology-sensitive areas from offshore outsourcing due to national security imperatives, and providing tax incentives for domestic R&D investment (and eliminating public financial incentives) for offshore outsourcing.