R&D Policy Involving Consumer-Friendly Strategy: Cooperative and Non-Cooperative R&D

Ya-Chin Wang ()
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Ya-Chin Wang: Kun Shan University

Journal of Industry, Competition and Trade, 2016, vol. 16, issue 2, No 6, 257-272

Abstract: Abstract In a highly globalized economy, foreign exporting firms have initiatives to be consumer friendly for many reasons. The aim of the present paper is to endogenize consumer-friendly actions by the exporting firms, and explore how government’s industrial policy and firm’s R&D investment are affected by the strategy of foreign exporting firms under cooperative and non-cooperative R&D commitments in an international rivalry market. It finds that consumer-friendly action is a dominant strategy equilibrium, and no matter whether under cooperative or non-cooperative R&D, a consumer-friendly firm tends to invest less than does the purely profit-maximizing firm on R&D under symmetrical decisions. In the case of firms cooperating in R&D and involving consumer-friendliness in action, their governments need not intervene. On the other hand, governments always subsidize non-cooperative R&D activities, or cooperative but unfriendly firms. Furthermore, the consumer-friendly action will result in more (less) R&D subsidies by the exporting government when both firms non-cooperate (cooperate) in R&D. Finally, it is robust to indicate that the government of an importing country prefers friendly foreign firms in any circumstances. Above all, the equilibrium outcomes explain the crucial role of consumer-friendly strategy for industrial policies and R&D activities.

Keywords: Cost-reducing R&D; Consumer-friendly strategy; R&D policy; Cooperative R&D (search for similar items in EconPapers)
JEL-codes: F13 L13 L52 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10842-015-0206-8

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