Offshoring low-wage work to China cut innovation for most firms, not boosted it

A new study finds that sending low-wage manufacturing work to China actually made many companies in Canada innovate less. Instead of boosting new ideas, offshoring cut research and development spending by 15% for most firms.

Companies and governments assumed that moving production to cheaper countries would free up money and time for new ideas. It turns out, for most firms, the opposite happened. When Chinese suppliers improved their quality, it made older products cheaper. This meant less incentive to invent new ones. Only the very largest companies saw an innovation boost.