Abstract
In this paper we derive the non-cooperative, optimal policy towards international R&D cooperation. Two types of R&D cooperation are considered: collaboration and coordination. When firms cooperate, the familiar strategic behavior, which prevails in R&D competition, is reduced, or eliminated, or even completely reversed. However, we prove that R&D subsidy is still an optimal policy for individual governments in the case of R&D coordination and, more strikingly, the subsidies are larger for higher degrees of coordination. Government policies do not help the firms to commit. In the case of R&D collaboration, both R&D subsidy and tax are possible. With linear demands, however, tax is never optimal; moreover, we show that the optimal policy is subsidy regardless of the strategic nature (substitute or complement) of the strategy variables, a result that contradicts the traditional wisdom.
| Original language | English |
|---|---|
| Pages (from-to) | 1727-1750 |
| Number of pages | 24 |
| Journal | European Economic Review |
| Volume | 42 |
| Issue number | 9 |
| DOIs | |
| Publication status | Published - 1 Nov 1998 |
| Externally published | Yes |
Bibliographical note
The authors benefit from presentation in the workshop of HKUST and the WEA International Pacific Rim Conference held in 1996 (Hong Kong).Funding
sWe would like to thank Leonard Cheng, Stephen Chiu, Brian Copeland, Sugata Marjit, and particularly, Elhanan Helpman (Ed.) and the anonymous referee for very helpful suggestion and comments. We also benefit from presentation in the workshop of HKUST and the WEA International Pacific Rim Conference held in 1996 (Hong Kong).
Keywords
- R&D
- Cooperation
- Collaboration
- Coordination
- Spillovers
- Strategic motive
- Coordination motive
- Subsidy
- Tax