International R&D Tournaments and Industrial Policy

This paper provides a unified approach to study the influence of uncertainty and spillovers on the direction of R&D policy when firms engage in international R&D competition. When the reward to the winner is exogenously given, it is shown that whether a government will tax or subsidize its f...

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Bibliographic Details
Published inJournal of Economic Integration Vol. 22; pp. 320 - 338
Main Author Zhou, Haiwen
Format Journal Article
LanguageEnglish
Published Center for Economic Integration, Sejong University 2007
SeriesJournal of Economic Integration
Subjects
Industrial policy
International R&D tournaments
Spillovers
Uncertainty
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Summary:This paper provides a unified approach to study the influence of uncertainty and spillovers on the direction of R&D policy when firms engage in international R&D competition. When the reward to the winner is exogenously given, it is shown that whether a government will tax or subsidize its firm is sensitive to the type of uncertainty that characterizes the R&D process. When the reward to the winner is endogenously determined by R&D spending, the direction of optimal policy is not only sensitive to the type of uncertainty, but also sensitive to the degree of spillovers.