Talent, Geography, and Offshore R&D.

This article focuses on modeling and quantifying the impact of offshore research and development (R&D) as a new dimension of globalization, where multinational corporations (MNCs) locate R&D activities abroad to access global talent and markets. Using a novel firm-level dataset combining patent and production data, the study documents key empirical patterns: affiliate R&D intensity rises with host country talent quality, R&D and production tend to co-locate due to frictions, and both decline with distance from headquarters. The author develops a general equilibrium model incorporating firm knowhow, worker ability, geographic frictions, and multinational production to explain these patterns and assess welfare effects. Counterfactual experiments reveal that differences in country endowments of talent and knowhow, as well as market access, significantly shape offshore R&D, which in turn amplifies the gains from globalization by about 30%, especially benefiting advanced economies. The paper also highlights complex interactions between offshore R&D, trade, and multinational production, showing that offshore R&D complements these traditional globalization channels for developed countries but can substitute for them in developing countries.