R&D offshore insourcing in Portugal: drivers and motivations

As the global economy becomes more integrated, the international fragmentation of the value chain activities becomes regular. Despite the recent wave of domestic and cross-border vertical disintegration, vertical integration of R&D remains a decision for some firms. The aim of this paper is to assess the main drivers and motivations for multinational firms to engage in R&D international insourcing, specifically selecting Portugal as the host location. Although transaction costs and resource-based view of the firm provide useful insights about the decision whether or not to integrate, we intend to assess the extent to which location specific features contribute for that decision. The main purpose is to understand if this location, i.e., Portugal, presents any unique features which may lead these firms to internally carry out R&D activities. Our results suggest that multinational firms tend to keep R&D activities in-house mainly because of costs and uncertainty issues and that Portugal was selected as location to set R&D both because of a market-oriented as well as technology-oriented strategy.