Research Joint Ventures, Licensing, and Industrial 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 89, 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: This paper reconsiders the explanation of R&D subsidies by Spencer and Brander (1983) and others by allowing firms to license their innovations and to pool their R&D investments. We show that 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 export oligopoly game. Nevertheless, national governments are driven to subsidize their own national firms in order to increase their strength in the joint venture bargaining game. Therefore, our analysis suggests an alternative explanation of the observed proliferation of R&D subsidies.

Keywords: patent licensing; industrial organization; R&D subsidies; research joint ventures; innovation 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-cna, nep-ino and nep-mic
Date: 2005-10

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Persistent link: http://EconPapers.repec.org/RePEc:trf:wpaper:89

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