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

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  • Fan, Cuihong
  • Wolfstetter, Elmar G.

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.

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Bibliographic Info

Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 165.

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Date of creation: Sep 2006
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Handle: RePEc:trf:wpaper:165

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Keywords: patent licensing; industrial organization; R&D subsidies; research joint ventures; technology policy;

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