Over the past 50 years, the globalization of trade and improved communication technologies have led to an increase in firms globally sourcing inputs. While previous studies have focused on the role of tangible production inputs, there is a growing trend of firms leveraging foreign ideas through immigrant researchers and imported R&D services. Access to foreign ideas enhances firms’ R&D efficiency and leads to higher productivity. Immigrant researchers also facilitate the sourcing of R&D services from abroad. Firms that utilize foreign R&D inputs tend to be larger, more productive, and have higher future productivity. This interdependence between hiring immigrant researchers and importing R&D services has implications for innovation policies and the effectiveness of R&D subsidies. Removing foreign ideas would significantly decrease the number of firms engaging in R&D and reduce the returns on productivity. Therefore, access to foreign ideas is crucial for firms’ R&D decisions and overall firm performance.
| Signal | Change | 10y horizon | Driving force |
|---|---|---|---|
| Increased reliance on global R&D | Shift from domestic to global R&D sourcing | More firms sourcing R&D from abroad | Reduced trade barriers and improved communication tech |
| Trend of leveraging foreign ideas | Incorporating foreign ideas in R&D | Broader range of ideas for R&D tasks | Access to diverse ideas and lower information costs |
| Firms using foreign R&D have higher productivity | Higher future productivity from foreign R&D | Increased productivity from incorporating foreign ideas | Access to diverse ideas and increased R&D efficiency |
| Immigrant researchers enable offshore R&D | Increased offshoring of R&D | More firms offshoring R&D to regions with immigrant researchers | Reduced information friction and easier access to specific regions |
| Access to foreign ideas crucial for R&D subsidies | Importance of foreign ideas for innovation policies | Increased effectiveness of R&D subsidies with foreign ideas | Need for foreign ideas to incentivize R&D engagement |
| Interdependence between immigrant researchers and imported R&D | Interconnected decisions boosting productivity | Increased use of both inputs with liberalized access to one | Higher combined effects on productivity with policies for both inputs |