Talent Shortage Driving US Companies to Expand R&D Centers Abroad

A lack of skilled technology talent has driven many American multinational companies to establish and expand their research and development (R&D) centers abroad, according to a study by two US universities.

China, India, and Israel are the three major locations where American innovation hubs are expanding.

The report – compiled by researchers associated with Carnegie Mellon University and Georgetown University – says this ‘globalization of R&D’ has not undermined the American economy, but instead ‘reinforced the technological leadership of US-based firms’ in the IT domain.

Businesses are increasingly relying on software and IT solutions to gain operational efficiency, and the lack of talent at home is forcing them to source skilled workers from abroad.

Considering the report, sourcing tech talent from abroad will not have a negative impact on the US economy, instead it could help spur technological activity within the country.

“Multinationals’ ability to access a global talent base could support a high rate of innovation even in the presence of the rising human resource cost of frontier R&D,” says Professor Lee G. Branstetter, who led the study.

“Global flows of investment, people, and ideas could help relax these constraints to some extent, raising growth, productivity, and consumption possibilities worldwide,” the report argues.

The globalization of R&D centers, according to the report, began sometime in nineties. To begin with, they recruited foreign engineers for their innovation hubs in the US, before shifting some of the R&D to those engineers’ home nations as the talent shortage worsened.

Preventing companies from sourcing talent abroad will not be a good idea, according to the report.

“If a greater globalization of R&D is required to maintain a flow of innovations in the domains where technological opportunity is greatest, then de-globalization could have severe consequences for the future trajectory of growth and living standards,” warns Britta M. Glennon, Ph.D. student at Heinz College, who co-authored the study.