Innovation Offshoring: Asia's Emerging Role in Global Innovation Networks

East-West Center, East-West Center Special Report # 10, July 2006

52 Pages Posted: 26 Apr 2016

See all articles by Dieter Ernst

Dieter Ernst

East-West Center; Centre for International Governance Innovation (CIGI)

Date Written: July 24, 2006


Most analysts agree that critical ingredients for economic growth, competitiveness and welfare in the United States have been policies that encourage strong investment in research and development (R&D) and innovation. In addition, there is a general perception that technological innovation must be based in the United States to remain a pillar of the American economy.

Over the past decade, however, the rise of Asia as an important location for “innovation offshoring” has begun to challenge these familiar notions and the sense of complacency they have engendered. Based on original research, the paper demonstrates that innovation offshoring is driven by profound changes in corporate innovation management as well as the globalization of markets for technology and knowledge workers. U.S. companies are at the forefront of this trend, experimenting with new approaches to the management of global innovation networks. But Asian governments and firms are playing an increasingly active role as promoters and new sources of innovation.

Innovation offshoring has created a competitive challenge of historic proportions for the United States. There are growing concerns that innovation offshoring may extend the “hollowing-out” of the U.S. economy well beyond manufacturing to include research and development, the most precious source of its economic growth. These fears may well feed into increasing technological protectionism and probably also science protectionism. But there are also new opportunities for economic cooperation as Asia’s progress creates new markets for U.S. firms.

The United States needs a new national strategy to cope with the opportunities and challenges posed by innovation offshoring. This paper recommends that such a strategy include the following elements:

1. Address “home-made” causes of innovation offshoring by sustaining and building upon existing strengths of the U.S. innovation system;

2. Support corporate innovation by (1) providing tax incentives to spur early-stage investments in innovative start-ups and (2) reforming the U.S. patent system so it is more accessible to smaller inventors and innovators;

3. Upgrade the U.S. talent pool of knowledge workers by (1) providing incentives to study science and engineering, (2) encouraging the development of management, interpretive, cross-cultural and other “soft” capabilities, and (3) encouraging immigration of highly skilled workers;

4. Improve access to and collection of innovation-related data to inform the national policy debate.

Keywords: Offshoring of innovation, Global innovation networks, Asia's role, chip design

JEL Classification: F1, F60, F68, L63, O32, O53

Suggested Citation

Ernst, Dieter, Innovation Offshoring: Asia's Emerging Role in Global Innovation Networks (July 24, 2006). East-West Center, East-West Center Special Report # 10, July 2006, Available at SSRN:

Dieter Ernst (Contact Author)

East-West Center ( email )

1601 East-West Road
Honolulu, HI 96848-1601
United States

Centre for International Governance Innovation (CIGI) ( email )

57 Erb Street West
Waterloo, Ontario N2L 6C2

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