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

Cuihong Fan and Elmar Wolfstetter ()
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Cuihong Fan: Shanghai University of Finance and Economics, School of Economics, Guoding Road 777 200433 Shanghai, China. cuihong@gmx.net

No 165, Discussion Papers from SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: We reconsider the justifications of R&D subsidies by Spencer and Brander (1983) and others by allowing firms to pool R&D investments and license innovations. In equilibrium R&D joint ventures are formed and licensing occurs in a way that eliminates the strategic benefits of R&D investment in the subsequent oligopoly game. Nevertheless, governments subsidize their domestic firms in order to raise their bargaining position in the joint venture. This holds true regardless of whether governments offer either unconditional or conditional subsidies. This suggests an alternative explanation of the observed proliferation of R&D subsidies.

Keywords: patent licensing; industrial organization; R&D subsidies; research joint ventures; technology policy (search for similar items in EconPapers)
JEL-codes: L13 O34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ino, nep-knm and nep-mic
Date: Written

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