Just because a company can offshore a portion of its operations doesn’t mean it always should. Recent research shows that although there are benefits to moving aspects of a business abroad (e.g. savings), the costs may add up over time through increased organizational complexity – and at a certain point, the move could be counterproductive. Global competition puts pressure on firms to relocate certain arms, even research and development, overseas. (With nations like China ramping up their innovative capacities, why stop at offshore manufacturing or customer support?)
But research suggest that offshoring too much of a firm’s innovation is likely to be costly, because it can hinder a firm’s ability to adapt to changing environments, which can affect performance. So keeping R&D on home turf can be beneficial in a world where innovation cycles grow shorter and developing new technologies more difficult.
Adapted from “Research: Don’t Offshore Your R&D” by Walter Frick.