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

19 Pages Posted: 31 Aug 2006

See all articles by Cuihong Fan

Cuihong Fan

Shanghai University of Finance and Economics

Elmar Wolfstetter

Humboldt University of Berlin - Faculty of Economics; Korea University - College of Economics and Commerce; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: August 2006

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.

Keywords: Patent licensing, industrial organization, R&D subsidies, research joint ventures

JEL Classification: L13, O34

Suggested Citation

Fan, Cuihong and Wolfstetter, Elmar G., Research Joint Ventures, Optimal Licensing, and R&D Subsidy Policy (August 2006). Available at SSRN: https://ssrn.com/abstract=927739 or http://dx.doi.org/10.2139/ssrn.927739

Cuihong Fan

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Elmar G. Wolfstetter (Contact Author)

Humboldt University of Berlin - Faculty of Economics ( email )

Institut für Wirtschaftstheorie I
Spandauer Strasse 1
Berlin
Germany
+49 30 2093 5652/3 (Phone)
+49 30 2093 5619 (Fax)

HOME PAGE: http://www2.hu-berlin.de/wt1wo/staff/wolfstetter/index.html

Korea University - College of Economics and Commerce ( email )

Anam-dong, Sungbuk-Ku
Seoul, 136-701
Korea

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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