A strong innovation performance based on R&D, product development and the implementation of advanced production technologies is key for the long-term competitiveness of European economies. This study investigates the effects of production offshoring on R&D and innovation activities of the firm in the home country. The analysis is based on a dataset of more than 3000 manufacturing firms from seven European countries. We employ propensity score matching to compare R&D and innovation activities of firms which have offshored production activities in a previous period to a control group of non-offshoring firms.\nThe analysis finds no negative effect of production offshoring on innovation and technological capabilities of firms in the home country. On contrary, offshoring firms spend significantly more on R&D or product design, and invest more in process innovation than non-offshoring firms. These results support a view on internationalisation of firms that regards offshoring as a strategy of international expansion, and not a passive reaction of firms to a loss of their competitiveness. Our results indicate that this expansion goes hand in hand with innovation and process modernization at home.<\/p>\n","protected":false},"featured_media":0,"menu_order":0,"template":"","jelcode":[376,377,378,379],"keyword":[382,380,383,244,381],"class_list":["post-1192","publication","type-publication","status-publish","hentry","jelcode-f230","jelcode-f610","jelcode-o310","jelcode-o330","keyword-home-country-effects","keyword-innovation","keyword-investment","keyword-offshoring","keyword-r-d"],"acf":{"year":2013,"month":6,"day":"","volume":"V","number":"001","pages":44,"reviewed":"","citeid":"FIW_RR_13-001","fiwseries":"FIW Studien","event":""},"yoast_head":"\n