Foreign Technology, Spillovers, and R&D Policy
AbstractThe authors study the appropriate domestic R&D policy in an asymmetric duopoly with R&D rivalry and technological spillovers from the more advanced firm. A 'foreign' and a 'home' firm compete over two periods on R&D and output. Initial foreign R&D lowers the cost of home's subsequent R&D improvements. The optimal policy balances the strategic incentive to reduce initial foreign R&D with the spillover incentive to increase it. If discounted home profits increase (decrease) with higher initial foreign R&D--the spillover (strategic) effect dominates--a tax (subsidy) to first-period home R&D is appropriate. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 38 (1997)
Issue (Month): 2 (May)
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