Research Joint Ventures, Optimal Licensing, and the R&D Subsidy Policy

Cuihong Fan and Elmar Wolfstetter ()
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Cuihong Fan: Shanghai University of Finance and Economics

The B.E. Journal of Theoretical Economics, 2008, vol. 8, issue 1

Abstract: We reconsider the justifications of the R&D subsidies of Spencer and Brander (1983), by allowing firms to form a research joint venture (RJV) and license innovations. If governments offer unconditional subsidies, an RJV is formed and the strategic benefits of R&D subsidies vanish. Nevertheless, governments subsidize their domestic firms to enhance their bargaining position in the joint venture subgame. If governments offer subsidies conditional on forming resp. not forming an RJV, the game has multiple equilibria: one that restores the Spencer and Brander result, and another in which governments induce the formation of an RJV by a combination of conditional taxes and subsidies.

Keywords: patent licensing; joint ventures; industrial organization (search for similar items in EconPapers)
JEL-codes: L13 O34 (search for similar items in EconPapers)
Date: 2008

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Persistent link: http://EconPapers.repec.org/RePEc:bpj:bejtec:v:8:y:2008:i:1:n:20

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