Subsidizing R&D cooperatives

A framework is developed with which the implementation of two commonly used R&D-stimulating policies can be evaluated: providing R&D subsidies and sustaining the formation of R&D cooperatives. Subsidized R&D cooperatives can also be analyzed. The analysis shows that providing R&D subsidies is more effective in raising private R&D investments than sustaining R&D cooperatives. Moreover, optimally subsidizing cooperative R&D or noncooperative R&D leads to the same level of R&D activity. Sustaining R&D cooperatives thus appears to be a redundant industrial policy, all else equal.