Does the offshoring of production degrade or enhance the innovative capabilities of manufacturing firms? We contribute to this debate by exploiting a policy shock that differentially affected the ability of Taiwanese firms to offshore some products to China. We find causal evidence that...

This paper documents the increasing importance of software for successful innovation in manufacturing sectors well beyond the traditional definition of electronics and information technology. Using panel data for 229 publicly listed firms from 18 countries across four manufacturing industries...