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Review of Economics and Statistics

R&D Networks: Theory, Empirics, and Policy Implications

Journal Article
König, Michael D., Xiaodong Liu and Yves Zenou (2019). “R&D Networks: Theory, Empirics, and Policy Implications”. Review of Economics and Statistics 101(3), 476–491.

Michael D. König, Xiaodong Liu, Yves Zenou

We analyze a model of R&D alliance networks where firms are engaged in R&D collaborations that lower their production costs while competing on the product market. We provide a complete characterization of the Nash equilibrium and determine the optimal R&D subsidy program that maximizes total welfare. We then structurally estimate this model using a unique panel of R&D collaborations and annual company reports. We use our estimates to study the impact of targeted versus nondiscriminatory R&D subsidy policies and empirically rank firms according to the welfare-maximizing subsidies they should receive.