Technology policy and the organization of R&D

Abstract

In this study we examine how technology policy in the form of R&D subsidies and encouragement of research joint ventures (RJVs) affects the investment incentives of firms in various types of imperfectly competitive markets. We find that joint ventures yield lower research intensities in the absence of subsidies. In the presence of optimal subsidy policy higher expected welfare is obtained with RJVs, but the optimal policy may also involve a more costly subsidy program. The analysis also identifies possible difficulties in implementing socially optimal policies arising from private incentives conflicting with the public interest.