Economics, Econometrics and Finance
8 years ago

Government subsidies drive firms to transform non-core products into core products.

Review of Economics and Finance
R&D Policy Competition with Process Innovation in a Multi-Product Duopoly
Stephen Jui-Hsien Chou

Paper Summary

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The article explores how two countries compete in R&D policies for multi-product firms. Firms invest more in R&D for different products and may switch focus from core to non-core products. Subsidies are the preferred policy in a competitive market, but zero subsidies are best when policies align. In a duopoly, higher subsidies are needed only if governments' policies are not aligned.