NCCSAS Blog

As more U.S. companies send their sophisticated R&D offshore, America must provide worker retraining to maintain its tech leadership

By Vivek Wadhwa

Research and development is increasingly going global, according to a new report by Duke's Offshoring Research Network (ORN). More than half of U.S. companies now have corporatewide initiatives to outsource innovation activities, up from 22% in 2005, according to the ORN, which has been tracking the growth of outsourcing since 2004. And of those companies already offshoring development, 60% intend to do so more aggressively.

The days when you could trace development of the majority of the world's innovative technologies back to U.S. labs are fading fast. Outsourcing of R&D is irreversible. Still, the U.S. retains key advantages and remains well-positioned to continue its technology leadership. But that can happen only if as a nation we recognize the changing role of R&D and refrain from wasting scarce resources trying to recapture a bygone era. Mandating that R&D traditionally performed in the U.S. should stay in America would tie the hands of companies at precisely the time they need flexibility to compete against up-and-coming foreign competitors.

First, we need to understand what is driving the shift. While cost savings are the strongest motivation, companies are also going abroad to tap global talent pools and to be closer to growth markets. Some of the biggest U.S. companies now get most of their revenue from abroad. Hewlett-Packard gets 69% of its revenue from outside the U.S., and Caterpillar gets 67%. IBM gets 63%, while Intel and Pfizer each generate 57% of sales from foreign markets.

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