More on subsidizing cooperative and noncooperative R&D in duopoly with spillovers

In an earlier article in this journal I compared two R&D-stimulating policies: allowing for R&D cooperatives and providing direct R&D subsidies (see Hinloopen, 1997:Journal of Economics 66: 151–175). I also considered the implementation of both policies simultaneously. Since then Amir (1998: Discussion Paper 1/1998, Odense University) has shown that the model I used as a starting point (i.e., that of d'Aspremont and Jacquemin, 1988:American Economic Review 78: 1133–1137) is not well-defined with respect to a crucial parameter (the technological spillover) and subsequently proposes an augmentation of the model. Replicating then my original analysis with this augmented model reveals that all results stated before remain valid. In addition I correct a minor error in Hinloopen (1997) related to the comparison of optimal R&D subsidies.     

A computational analysis of R&D support programs

We compare two common government R&D support programs, R&D tax credits and direct R&D grants. To study their effectiveness and the extent to which their design matters, we analyze these programs within a dynamic equilibrium model of imperfectly competitive industries. Adopting comprehensive welfare measures that take into account government, producer and consumer surpluses, we find that both schemes exhibit positive social returns. Mid-range R&D-intensive sectors exhibit higher social returns than either high or low R&D-intensive sectors. Both incentive schemes generate positive measures of R&D input additionality of magnitudes consistent with empirical R&D research. However, R&D grants that require firms to allocate subsidy funds to R&D spur less R&D than a more flexible R&D tax credit. Subsidy schemes can even induce competing firms to over-spend on R&D, generating negative producer surplus and possibly negative social returns.     

Input and output additionality of R&D subsidies

This article analyses the effects of public R&D subsidies on R&D input and output of German firms. We distinguish between the direct impact of subsidies on R&D investment and the indirect effect on innovation output measured by patent applications. We disentangle the productivity of purely privately financed R&D and additional R&D investment induced by the public incentive scheme. For this, a treatment-effect analysis is conducted in a first step. The results are implemented into the estimation of a patent production function in a second step. It turns out that both purely privately financed R&D and publicly induced R&D show a positive effect on patent outcome.     

Assessing the influence of differentiation strategy and R&D subsidies on R&D cooperation

This paper explores the R&D cooperation determinants of the innovative companies belonging to the Spanish manufacturing sector. Our findings suggest that the variable R&D subsidy is endogenous, significant, and has a strong positive influence on R&D cooperation. This is a clear indication that the achievement of public aid is often conditioned by the obligation for companies to cooperate in R&D. We have also found that the differentiation strategy variable is significant and has a negative influence on R&D cooperation. Companies positioned in a differentiation strategy probably own and use some different knowledge from other companies. Consequently, they will not have much interest in taking advantage of the spillovers generated by other companies. It is therefore logical that they are reluctant to establish cooperation agreements on R&D. Therefore, companies positioned in the differentiation strategy need public policies to support R&D that are not conditioned to the establishment of cooperation agreements.     

Measuring universities’ R&D performance in China’s provinces: a multistage efficiency and effectiveness perspective

ABSTRACT

Evaluating universities’ R&D performance can serve as a tool for policymakers, enabling them to identify the best R&D practitioners for benchmarking and develop strategies for enhancing performance by highlighting areas of weakness. This study divides universities’ R&D performance into two dimensions: efficiency and effectiveness. We employ a network data envelopment analysis approach to measure universities’ R&D efficiency, and separately use a multi-index comprehensive evaluation method to assess their R&D effectiveness from a multistage perspective. We calculate the comprehensive R&D performance of universities in 30 provinces in China from 2004 to 2014. An analysis of temporal variation reveals that universities’ R&D performance in some provinces improved rapidly, increasing gaps in performance as a whole. The spatial pattern for the 30 provinces shows that universities in provinces with medium or strong R&D performance are mainly in coastal provinces and central areas in China. Finally, universities’ R&D activities are considered ‘efficient and effective’ only in a small number of provinces, while in most provinces, these activities can generally be considered ‘less efficient and effective.’ Hence, universities in provinces with different R&D performance modes should implement targeted improvement strategies according to their characteristics.     

Knowledge flows,changing firms’ competences and patent citations: an analysis of the trajectory of IBM

We show for a widely-used class of models for strategic R&D that optimally subsidizing cooperative R&D or noncooperative R&D leads to the same level of private R&D investments. We then highlight the limitations of the framework that are responsible for this finding and conclude that policy recommendations based on the type of model used here should be treated as highly tentative.     

Does Firm Size make a Difference? Analysing the Effectiveness of R&D Subsidies in East Germany

We analyse the impact of public subsidies on private sector research and development (R&D) activity for a sample of East German firms. Using propensity score matching, our empirical results indicate that subsidized firms indeed show a higher level of R&D intensity (R&D expenditures relative to total turnover) and a higher probability for patent application compared with non‐subsidized firms. We find that, on average, the R&D intensity increases from 1.5% to 3.9%. The probability of patent application rises from 20% to 40%. These results closely match earlier empirical findings for East Germany. Given the fact that the East German innovation system is particularly driven by small‐ and medium‐sized enterprises (SMEs), we draw special attention to the effectiveness of R&D subsidies for this latter subgroup. Here, no specific empirical evidence is available so far. Our findings indicate that policy effectiveness also holds for private R&D activity of SMEs, with the highest increase in terms of R&D intensity being estimated for microbusinesses with up to ten employees.     

Effectiveness of R&D subsidies during the crisis: firm-level evidence across EU countries

This paper is one of the first attempts in the literature to evaluate the effectiveness of R&D policies in Europe during the great crisis of the late 2000s. Using homogenous firm-level data for the largest EU Member States over the period 2007–2009, we test whether manufacturing firms receiving public subsidies spent more on R&D. The analysis is performed using both non-parametric techniques and parametric estimation methods accounting for the possible endogenous selectivity of R&D subsidies. The hypothesis of full crowding-out is rejected in all countries under exam as firms did not replace their own resources with public grants. However, these firms did not allocate additional funds to research and hence, differently from earlier works, we do not find evidence for additionality effects of R&D subsidies. Our estimates indicate that, albeit not expansive, public subsidies to R&D thwarted the reduction of firm R&D efforts in the aftermath of economic crisis.     

Research Joint Ventures with Asymmetric Spillovers and Symmetric Contributions

The paper proposes a new type of R&D cooperation between firms endowed with asymmetric spillovers, which we call symmetric Research Joint Venture (RJV) cartelization, based on reciprocity in information exchange. In this setting, firms coordinate their R&D expenditures and also share information, but such that the asymmetric spillover rates are increased through cooperation by equal amounts. It is found that this type of cooperation reduces R&D investment by the low spillover firm when its spillover is sufficiently low and the spillover of its competitor is sufficiently high. But it always increases the R&D of the high spillover firm, as well as total R&D (and hence effective cost reduction and welfare). A firm prefers no cooperation to symmetric RJV cartelization if its spillover rate is very high and the spillover rate of its competitor is intermediate. The profitability of symmetric RJV cartelization relative to other modes of cooperation is analyzed. It is found that symmetric RJV cartelization constitutes an equilibrium for a very wide range of spillovers, namely, when asymmetries between spillovers are not too large. As these asymmetries increase, the equilibrium goes from symmetric RJV cartelization, to RJV cartelization, to R&D competition, to R&D cartelization.     

Cooperation and the efficiency of regional R&D activities

This paper investigates the relationship between the cooperativebehaviour of manufacturing establishments in a region and theefficiency of their R&D activities, using data for 11 Europeanregions. Some significant differences in the attitude towardsR&D cooperation as well as with regard to the efficiencyof R&D activities between the regions can be found. However,these two issues appear to a large degree to be empiricallyunrelated. Therefore, the role of R&D cooperation in regionalinnovation systems remains unclear.     

A comparative analysis of the change in R&D efficiency: a case of R&D leaders in the technology industry

This paper measures the cumulative change in research and development (R&D) efficiency of globally leading R&D companies in the technology industry. We use Data Envelopment Analysis /Malmquist index to analyse 49 such companies. The change in R&D efficiency is analysed by decomposing the Malmquist index into ‘catch-up’ and ‘frontier shift’ indices, and by comparing cumulative indices to those at the starting period. Those cumulative indices are obtained at both a firm and an industry level. Results indicate that the overall R&D efficiency of these globally leading R&D companies declined slightly during the period 2007–2013. At a firm level, this study determines in detail how the trend of each firm in R&D activities differs from other companies.     

The effectiveness of R&D subsidies

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.