Back-shoring vs. Offshoring: The importance of innovating with host-country inventors

This study investigates the association between the intensity of innovation activities that firms perform offshore with host-country inventors (IHCI) and the time before back-shoring, a rising form of de-internationalization. IHCI is viewed as a pull factor that alleviates liabilities of both foreignness and outsidership, hence creating incentives for more extended offshoring stays. Additionally, the study investigates whether specific types of IHCI are associated with offshoring duration, namely IHCI leading to exploratory innovation and IHCI leading to an innovation portfolio with a broad scope. The study employs a Cox model to analyze 301 offshoring initiatives implemented by US firms, partially or totally ended through back-shoring. Results suggest that IHCI is associated with longer offshore duration. Further, duration is longer when IHCI leads to a broader innovation portfolio. • The link between offshore duration and patenting with host-country inventors is studied. • Offshore duration is analysed through the lens of knowledge accumulation theory. • Innovating with host-country inventors increases the duration of offshore initiatives. • Duration is longer when innovation involves a broad portfolio of technologies. • Implications on the role of innovation for back-shoring and offshoring are derived.