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The effectiveness of R&D subsidies

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  • Mayra Rebolledo
  • Joel Sandonís

Abstract

In this paper, the effectiveness of R&D subsidies is analyzed in an oligopolistic model that we apply to the cases of international R&D competition and cooperation. We find that the existence of asymmetric information among firms on whether a rival (or partner) is being subsidized or not may play a key role in explaining whether subsidies are effective or not in increasing R&D investments. In particular, it is shown that if the existence of the subsidy is made public (e.g. because strict information release regulation about R&D subsidies is enforced) and depending on the strategic relationship between the firms’ R&D efforts, an R&D subsidy could even hurt the subsidized firm.

Suggested Citation

  • Mayra Rebolledo & Joel Sandonís, 2012. "The effectiveness of R&D subsidies," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 21(8), pages 815-825, November.
    • Handle: RePEc:taf:ecinnt:v:21:y:2012:i:8:p:815-825
    DOI: 10.1080/10438599.2012.671997
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    References listed on IDEAS

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    Cited by:

    1. Hattori, Masahiko & Tanaka, Yasuhito, 2016. "License or entry in oligopoly," MPRA Paper 73547, University Library of Munich, Germany.
    2. Masahiko Hattori & Yasuhito Tanaka, 2018. "License and Entry Strategies for an Outside Innovator Under Duopoly with Combination of Royalty and Fixed Fee," Journal of Industry, Competition and Trade, Springer, vol. 18(4), pages 485-502, December.
    3. Hattori, Masahiko & Tanaka, Yasuhito, 2017. "Royalty and license fee under vertical differentiation in oligopoly with or without entry of innovator: Two-step auction," MPRA Paper 78859, University Library of Munich, Germany.
    4. Masahiko Hattori & Yasuhito Tanaka, 2018. "License and Entry Strategies for an Outside Innovator Under Duopoly," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 4(1), pages 135-152, March.
    5. Masahiko Hattori & Yasuhito Tanaka, 2016. "License or entry with vertical differentiation in duopoly," Economics and Business Letters, Oviedo University Press, vol. 5(1), pages 17-29.
    6. Hattori, Masahiko & Tanaka, Yasuhito, 2017. "Vertical differentiation in oligopoly and license fees when outside innovator can enter the market: Two-step auction," MPRA Paper 78987, University Library of Munich, Germany.
    7. Jiaqi Chen & Sang-Ho Lee & Timur K. Muminov, 2021. "Welfare-reducing discriminatory output subsidies with mixed ownership and R&D," Economics Bulletin, AccessEcon, vol. 41(3), pages 1592-1602.
    8. Masahiko Hattori & Yasuhito Tanaka, 2020. "License Fees in Oligopoly When Outside Innovator can Enter the Market: Two-Step Auction," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 22(03), pages 1-15, September.
    9. Hattori, Masahiko & Tanaka, Yasuhito, 2017. "License and entry decision for innovating firm in international duopoly under vertical differentiation," MPRA Paper 78995, University Library of Munich, Germany.
    10. Masahiko Hattori & Yasuhito Tanaka, 2020. "Entry of Innovator and License in Oligopoly," Journal of Industry, Competition and Trade, Springer, vol. 20(4), pages 709-731, December.
    11. Chen, Jiaqi & Lee, Sang-Ho, 2020. "Endogenous timing game with R&D decisions and output subsidies," MPRA Paper 99503, University Library of Munich, Germany.
    12. Hattori, Masahiko & Tanaka, Yasuhito, 2017. "License and entry strategies for outside innovator in duopoly," MPRA Paper 76444, University Library of Munich, Germany.
    13. Hattori, Masahiko & Tanaka, Yasuhito, 2017. "License and entry strategies for an outside innovator in duopoly with combination of royalty and fixed fee under vertical differentiation," MPRA Paper 78856, University Library of Munich, Germany.
    14. Bai, Rui & Lin, Boqiang & Liu, Xiying, 2021. "Government subsidies and firm-level renewable energy investment: New evidence from partially linear functional-coefficient models," Energy Policy, Elsevier, vol. 159(C).
    15. Shoji Haruna & Rajeev K. Goel, 2017. "Output subsidies in mixed oligopoly with research spillovers," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(2), pages 235-256, April.
    16. Hattori, Masahiko & Tanaka, Yasuhito, 2017. "Royalty and license fee under oligopoly with or without entry of innovator: Two-step auction," MPRA Paper 78858, University Library of Munich, Germany.

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