 Market failures and the additionality effects of public support to private R&D: Theory and empirical implicationsTuomas Takalo, Tanja Tanayama and Otto Toivanen International Journal of Industrial Organization, 2013, vol. 31, issue 5, 634-642 Abstract: We extend the theoretical basis of the empirical literature on the effects of R&D subsidies by providing an estimable model of strategic interaction among subsidy applicants, and public and private sector R&D financiers. Our model incorporates fixed R&D cost and a cost of external finance. We derive the optimal support rule. At the intensive (extensive) margin the costs of external funding reduce (increase) the optimal subsidy rate. We also establish necessary and sufficient conditions for the existence of additionality. It turns out that additionality at the intensive margin is less likely with higher spillovers. Our results suggest that the relationship between additionality and welfare may not be straightforward. Keywords: Additionality; Financing of innovations; Market failure; R&D investments; Subsidies; Welfare (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:31:y:2013:i:5:p:634-642 DOI: 10.1016/j.ijindorg.2013.02.002 Access Statistics for this article International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal More articles in International Journal of Industrial Organization from Elsevier |
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