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Industrial Policy and Firm Heterogeneity

  • Barros, Pedro P
  • Nilssen, Tore

Our concern in this paper is with firm-specific industrial policy. When R&D subsidies or taxes are differentiated among firms, the question arises as to which firms in an industry should receive such support. We analyze a situation where firms differ in their R&D technologies in two distinct ways: in the costs of performing R&D activities and in the output obtained from such activities. We find that the optimal firm-specific industrial policy is affected differently by the two sources of firm heterogeneity. Furthermore, a change in a firm's R&D productivity has an ambiguous effect on the optimal policy towards the firm. Copyright 1999 by The editors of the Scandinavian Journal of Economics.

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Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 101 (1999)
Issue (Month): 4 (December)
Pages: 597-616

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Handle: RePEc:bla:scandj:v:101:y:1999:i:4:p:597-616
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  1. Neary, J. Peter, 1994. "Cost asymmetries in international subsidy games: Should governments help winners or losers?," Journal of International Economics, Elsevier, vol. 37(3-4), pages 197-218, November.
  2. Lars-Hendrik Röller & Mikhel M. Tombak & Ralph Siebert, 1997. "Why Firms Form Research Joint Ventures: Theory and Evidence," CIG Working Papers FS IV 97-06, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG), revised Oct 1997.
  3. W. Salant, Stephen & Shaffer, Greg, 1998. "Optimal asymmetric strategies in research joint ventures," International Journal of Industrial Organization, Elsevier, vol. 16(2), pages 195-208, March.
  4. Leahy, Dermot & Neary, J Peter, 1999. "R&D Spillovers and the Case for Industrial Policy in an Open Economy," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 40-59, January.
  5. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
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  7. Van Long, N. & Soubeyran, A., 1996. "Cost Heterogeneity, Industry Concentration and Startegic Trade Policies," G.R.E.Q.A.M. 96a39, Universite Aix-Marseille III.
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  16. C Montagna, . "Strategic Trade Policy When Firms Have Different Efficiency Levels," Dundee Discussion Papers in Economics 070, Economic Studies, University of Dundee.
  17. Miyagiwa, Kaz & Ohno, Yuka, 1997. "Strategic R&D policy and appropriability," Journal of International Economics, Elsevier, vol. 42(1-2), pages 125-148, February.
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