Beyond Cost: Product Complexity and the Global Product Development Location Advantage

Abstract

Discussions of location advantages in global product development are largely based on self-reported surveys, and often agnostic to product characteristics. We build on this previous work by investigating location advantages and the influence of product complexity using negative binomial models. We find that the likelihood of developing products in a country increases as its market size, number of engineering graduates and national capability increases. However, it neither varies with labor cost nor market growth rate. We also find that complex products are more likely to be developed in countries with high national capability, and national capability is directly related to firm capability.