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The purpose of this study is to examine how offshore research and development (R&D) strategy based on the local collaborative relationships plays a significant role in enhancing firm productivity. Due to the specific feature of technological assets, which are highly dependent on the different kinds of subsidiary mandate, we further examine the different effects of offshore R&D between exploitation-oriented and exploration-oriented mandate. This analysis takes advantage of the longitudinal data set on Taiwan-based firms for the period 2008-2011 and employs a propensity score matching of multinomial treatment method to estimate the causal effects, that is, the average treatment effect on the treated. The empirical results show that offshore R&D strategy plays a significant role in enhancing productivity. Moreover, for exploration-oriented mandate the offshore R&D strategy based on the local collaborative relationships will result in an immediate effect on their productivity, while for exploitation-oriented mandate the carryover effect is only observed with offshore R&D strategy.
