Using a North–South framework, this study proposes a theoretical general equilibrium model with multiple Northern firms offshoring innovative R&D to the South. Northern firms vary in their ability to manage Southern researchers, and Southern researchers vary in quality. Southern researchers of higher quality are more productive but also more likely to leave the firm and start a competing firm through imitation of the product. A strengthening of Southern IPR‐protection increases offshoring, global welfare, and innovation while eliminating employment opportunities for skilled Southern researchers. Therefore, stronger Southern IPR‐protection has the potential to contribute to the emigration of highly qualified researchers. The model then predicts the effects of changes to the Northern country as a result of this increased emigration. Increases in Northern technology increase offshoring and innovation while decreasing the amount of technology transferred. The effect of an increase in Northern researcher quality depends on the degree of the increase in productivity as a result of the higher quality workers.

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for their helpful comments.906 | COHLE size. The connection between industry-level innovative R&D offshoring and Southern market size implies that Southern consumers often prefer foreign goods to domestic goods. Finally, I find evidence to support Proposition 3. Firm-level innovative R&D offshoring is not affected by import tariffs at an economically significant magnitude.This paper contributes to a number of different strands of literature. Using a new North-South model, I contribute to the global outsourcing and offshoring literature as a whole. Previous North-South models have explored the offshoring of tasks; however, few studies have specifically modelled the offshoring of innovation to the South. Acemoglu et al. (2015) develop a model with offshoring of intermediate inputs in a global economy. Fan (2017) builds a global model to show talent acquisition and market access motivate the offshoring of innovation; however, the author does not specifically model the challenges related to choosing Southern researchers over Northern researchers. Feenstra and Taylor (2011) show the relationship between the price of outsourced inputs and R&D affects the amount of outsourcing in equilibrium. Dinopoulos and Tsoulouhas ( 2015) model the offshoring of heterogenous tasks to the South while assuming Southern workers are less skilful than their Northern counterparts. Cohle (2019a), in explaining IPR protection's role in the brain drain effect, builds a model of firms offshoring innovation to the South and selling products to a global economy. I contribute to this strand of literature by exploring a negative consequence to using Southern researchers: product imitation. Following Lai et al. ( 2009), I include the notion of information leakage when using Southern researchers. Using employee mobility as the channel of imitation, the probability of imitation of a firm's product depends on how many Southern employees are working on a single product. Employee mobility then also acts as the channel of technology transfer. 3 This study also contributes to literature exploring the connection between multinational activities, high-tech industries and IPR protection. Javorcik ( 2004) finds weak IPR protection deters FDI in hightech industries. Bilir (2014) shows that countries with strong IPR protection see high R&D intensity industries increasing activities in host countries more than their low R&D counterparts. Canals and Sener (2014) identify 16 countries that underwent an IPR reform and examine the effect of the reform on offshoring to those countries. The authors find that high-tech industries in the U.S. increase their intraindustry and broad offshoring following IPR reform. Branstetter et al. (2006), Branstetter et al. (2011 also use the time of a major IPR reform in a country. The authors find that these high patent firms increase intrafirm royalty payments, affiliate employee compensation, affiliate assets and affiliate R&D spending for parent firms with high technology transfer rates when faced with a strengthening of IPR pr...

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