R&D, offshoring, and slicing along a global production chain

This paper analyzes the decision of a multinational firm from a developed country to slice a production chain and to allocate different tasks in the production chain globally. The process involves a wide range of tasks that varies from very routine jobs to research and development (R&D) intensive work. We find that under certain conditions, a drop in offshoring costs (1) leads to more slicing (an increase in the length of production chain) and more offshoring, (2) stimulates R&D, and (3) raises employment in the developed country.