IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/106896.html

Government R&D Subsidies and International Competitiveness of Labor-managed Firms

Author

Listed:
  • Ho, Jerry
  • Hoang, Vincent
  • Wilson, Clevo

Abstract

The literature postulates that government subsidization of strategic R&D activities of profit maximising firms (PMFs) increases their shares in international markets. Will this also hold for labor-managed firms (LMFs) which are owned by employees and aim to maximize the profit per labor? This paper provides a theoretical model that examines how such governmental interventions can help LMFs in their home countries to compete better with PMFs in international markets. Our model shows that in most, but not all cases, investing more in R&D activities benefits LMFs by increasing their shares in international markets and decreasing the market share of their competitors. The optimal government R&D subsidy or tax for LMFs depends on the R&D elasticity of LMFs as well as how their competitors react to R&D investment. In contrast, the optimal government R&D subsidy for PMFs depends solely on the slope of the R&D reaction curve of PMFs competitors. Our results present useful policy implications for those governments that seek ways to support LMFs - or more broadly cooperatives - to attain more sustained growth given their advantages over PMFs in the context of sustainable development.

Suggested Citation

  • Ho, Jerry & Hoang, Vincent & Wilson, Clevo, 2020. "Government R&D Subsidies and International Competitiveness of Labor-managed Firms," MPRA Paper 106896, University Library of Munich, Germany, revised 09 Dec 2020.
    • Handle: RePEc:pra:mprapa:106896
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/106896/16/MPRA_paper_106896.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gecchelin, Tommaso & Webb, Jeremy, 2019. "Modular dynamic ride-sharing transport systems," Economic Analysis and Policy, Elsevier, vol. 61(C), pages 111-117.
    2. Natália Monteiro & Geoff Stewart, 2015. "Scale, Scope and Survival: A Comparison of Cooperative and Capitalist Modes of Production," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(1), pages 91-118, August.
    3. Mai, Chao-Cheng & Hwang, Hong, 1989. "Export subsidies and oligopolistic rivalry between labor-managed and capitalist economies," Journal of Comparative Economics, Elsevier, vol. 13(3), pages 473-480, September.
    4. Nicholas Bloom & Charles I. Jones & John Van Reenen & Michael Webb, 2020. "Are Ideas Getting Harder to Find?," American Economic Review, American Economic Association, vol. 110(4), pages 1104-1144, April.
    5. Luca Lambertini & Gianpaolo Rossini, 1998. "Capital Commitment and Cournot Competition with Labour‐managed and Profit‐maximising Firms," Australian Economic Papers, Wiley Blackwell, vol. 37(1), pages 14-21, March.
    6. Boeing, Philipp & Hünermund, Paul, 2020. "A global decline in research productivity? Evidence from China and Germany," Economics Letters, Elsevier, vol. 197(C).
    7. James A. Brander & Barbara J. Spencer, 1983. "Strategic Commitment with R&D: The Symmetric Case," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 225-235, Spring.
    8. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
    9. Luo, Jianli, 2013. "Absorptive capacity and R&D strategy in mixed duopoly with labor-managed and profit-maximizing firms," Economic Modelling, Elsevier, vol. 31(C), pages 433-439.
    10. Loek Groot & Daan van der Linde, 2017. "The Labor-Managed Firm: Permanent or Start-Up Subsidies?," Journal of Economic Issues, Taylor & Francis Journals, vol. 51(4), pages 1074-1093, October.
    11. Mikami, Kazuhiko, 2018. "Are cooperative firms a less competitive form of business? Production efficiency and financial viability of cooperative firms with tradable membership shares," Economic Systems, Elsevier, vol. 42(3), pages 487-502.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kazuhiro Ohnishi, 2022. "Lifetime Employment and Stackelberg Mixed Duopoly Games with a Foreign Labour-Managed Competitor," Arthaniti: Journal of Economic Theory and Practice, , vol. 21(1), pages 27-42, June.
    2. Ohnishi, Kazuhiro, 2019. "Capacity choice in an international mixed triopoly," MPRA Paper 94051, University Library of Munich, Germany.
    3. Kazuhiro Ohnishi, 2009. "Capacity Investment and Mixed Duopoly with State-Owned and Labor-Managed Firms," Annals of Economics and Finance, Society for AEF, vol. 10(1), pages 49-64, May.
    4. Ohnishi, Kazuhiro, 2024. "A labor-managed Bertrand oligopoly game with lifetime employment as a strategic commitment," MPRA Paper 121486, University Library of Munich, Germany.
    5. Lutz Bornmann & Russell J. Funk, 2025. "Popper’s probability calculus and the decline of scientific disruptiveness," Scientometrics, Springer;Akadémiai Kiadó, vol. 130(8), pages 4801-4807, August.
    6. Naudé, Wim & Nagler, Paula, 2022. "The Ossified Economy: The Case of Germany, 1870-2020," IZA Discussion Papers 15607, Institute of Labor Economics (IZA).
    7. James A. Brander & Barbara J. Spencer, 1986. "International Oligopoly and Asymmetric Labour Market Institutions," NBER Working Papers 2038, National Bureau of Economic Research, Inc.
    8. Lamantia, Fabio & Pezzino, Mario & Tramontana, Fabio, 2018. "Dynamic analysis of discontinuous best response with innovation," Journal of Economic Dynamics and Control, Elsevier, vol. 91(C), pages 120-133.
    9. Hagem, Cathrine, 2009. "The clean development mechanism versus international permit trading: The effect on technological change," Resource and Energy Economics, Elsevier, vol. 31(1), pages 1-12, January.
    10. Hajkowicz, Stefan & Sanderson, Conrad & Karimi, Sarvnaz & Bratanova, Alexandra & Naughtin, Claire, 2023. "Artificial intelligence adoption in the physical sciences, natural sciences, life sciences, social sciences and the arts and humanities: A bibliometric analysis of research publications from 1960-2021," Technology in Society, Elsevier, vol. 74(C).
    11. Li, Qing & Hu, Dezhuang & Li, Tang, 2022. "The innovation of family firms in China: New evidence from the China employer-employee survey," China Economic Review, Elsevier, vol. 72(C).
    12. repec:ebl:ecbull:v:12:y:2007:i:26:p:1-7 is not listed on IDEAS
    13. Yoshihiro Tomaru & Yasuhiko Nakamura & Masayuki Saito, 2009. "Capacity Choice in a Mixed Duopoly with Managerial Delegation," Economics Bulletin, AccessEcon, vol. 29(3), pages 1904-1924.
    14. Michael Kopel & Clemens Löffler, 2008. "Commitment, first-mover-, and second-mover advantage," Journal of Economics, Springer, vol. 94(2), pages 143-166, July.
    15. Tanja Hörtnagl & Rudolf Kerschbamer, 2014. "How the Value of Information Shapes the Value of Commitment Or: Why the Value of Commitment Does Not Vanish," Working Papers 2014-03, Faculty of Economics and Statistics, Universität Innsbruck.
    16. Naudé, Wim & Nagler, Paula, 2021. "The Rise and Fall of German Innovation," IZA Discussion Papers 14154, Institute of Labor Economics (IZA).
    17. Zhang, Anming & Zhang, Yimin, 2006. "Rivalry between strategic alliances," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 287-301, March.
    18. Wang, Jieshu & Lobo, José, 2024. "Extensive growth of inventions: Evidence from U.S. patenting," Technological Forecasting and Social Change, Elsevier, vol. 207(C).
    19. Barbara J. Spencer & James A. Brander, 1983. "International R & D Rivalry and Industrial Strategy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(4), pages 707-722.
    20. Nicola Meccheri & Luciano Fanti, 2016. "Should delegation contracts be made before or after union wage setting? Endogenous moves in a managerial-unionized duopoly," Working Paper series 16-18, Rimini Centre for Economic Analysis.
    21. Giovanni Abramo & Ciriaco Andrea D’Angelo & Ida Mele, 2022. "Impact of Covid-19 on research output by gender across countries," Scientometrics, Springer;Akadémiai Kiadó, vol. 127(12), pages 6811-6826, December.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics
    • F1 - International Economics - - Trade

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:106896. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.