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R&D Subsidies and Multinational Firm Ownership

Author

Listed:
  • Gretz Richard T

    () (Bradley University)

  • Highfill Jannett

    () (Bradley University)

  • Scott Robert C

    () (Bradley University)

Abstract

Most industrialized countries subsidize private sector R&D, even under some circumstances when the firm is owned by foreigners. The present paper, using a simple theoretical analysis of a monopoly firm selling only to the U.S. market, argues that such subsidies are welfare enhancingas long, of courseas the funding agency chooses the projects it funds wisely. The paper suggests that a subsidy rate of 50% might be warranted under some circumstances.

Suggested Citation

  • Gretz Richard T & Highfill Jannett & Scott Robert C, 2007. "R&D Subsidies and Multinational Firm Ownership," Global Economy Journal, De Gruyter, vol. 7(1), pages 1-47, February.
  • Handle: RePEc:bpj:glecon:v:7:y:2007:i:1:n:5
    as

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    References listed on IDEAS

    as
    1. Karolina Ekholm & Johan Torstensson, 1997. "High-Technology Subsidies in General Equilibrium: A Sector-Specific Approach," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1184-1203, November.
    2. Stephen Martin & John T. Scott, 1999. "The Nature of Innovation Market Failure and the Design of Public Support for Private Innovation," CIE Discussion Papers 1999-02, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
    3. Isabel Busom, 2000. "An Empirical Evaluation of The Effects of R&D Subsidies," Economics of Innovation and New Technology, Taylor & Francis Journals, pages 111-148.
    4. Minoru Kitahara & Toshihiro Matsumura, 2006. "Realized Cost-Based Subsidies For Strategic R&D Investments With "Ex Ante" And "Ex Post" Asymmetries," The Japanese Economic Review, Japanese Economic Association, vol. 57(3), pages 438-448.
    5. Poyago-Theotoky, Joanna, 1998. "R&D Competition in a Mixed Duopoly under Uncertainty and Easy Imitation," Journal of Comparative Economics, Elsevier, pages 415-428.
    6. Martin, Stephen & Scott, John T., 2000. "The nature of innovation market failure and the design of public support for private innovation," Research Policy, Elsevier, pages 437-447.
    7. Miyagiwa, Kaz & Ohno, Yuka, 2002. "Uncertainty, spillovers, and cooperative R&D," International Journal of Industrial Organization, Elsevier, pages 855-876.
    8. Klette, T.J. & Moen, J. & Griliches, Z., 1999. "Do Subsidies to Commercial R&D Reduce Market Failures? Microeconometric Evaluation Studies," Papers 16/99, Norwegian School of Economics and Business Administration-.
    9. Lakdawalla, Darius & Sood, Neeraj, 2004. "Social insurance and the design of innovation incentives," Economics Letters, Elsevier, vol. 85(1), pages 57-61, October.
    10. Petrakis, Emmanuel & Poyago-Theotoky, Joanna, 2002. "R&D Subsidies versus R&D Cooperation in a Duopoly with Spillovers and Pollution," Australian Economic Papers, Wiley Blackwell, vol. 41(1), pages 37-52, March.
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