Trade policy mix: IPR protection and R&D subsidies

Abstract

This paper analyses strategic R&D policy under circumstances where intellectual property rights protection resulting from firms' R&D investment is not perfect. By examining policy choices wherein a government chooses both R&D subsidies and IPR protection levels simultaneously, we show that it is optimal for a government to adopt sufficiently weak IPR protection and to subsidize R&D investments of domestic firms. Inducing R&D investment of foreign rival firms will increase the profits of domestic firms. JEL classification: F13Mélanges de politiques commerciales: protection des droits de propriété intellectuelle et subventionsà la R&D. Ce mémoire analyse une politique stratégique de R&D quand la protection des droits de propriété intellectuelle (DPI) qui découlent d'investissements en R&D par les entreprises est imparfaite. En examinant les choix de politiques par lesquels un gouvernement définit simultanément les niveaux de subventions pour la R&D et de protection de la propriété intellectuelle, on montre qu'il est optimal pour un gouvernement d'adopter une protection des DPI suffisamment faible et de subventionner les investissements en R&D des entreprises nationales. Susciter un accroissement des investissements en R&D des entreprisesétrangères rivales devrait augmenter les profits des entreprises nationales.

Globally Optimal R&D Subsidy Policy: an Economist's View on the WTO Subsidy Agreement

“…First, we did not consider any legal perspective and negotiating history of disciplines on subsidies because these issues are out of bound in this paper. In addition, it is known that R&D subsidies are deeply related to protection of intellectual property rights (IPRs) as shown in Kang (2006), because an exporting country's assistance to domestic R&D activities could flow into a rival country whose IPR protection is not perfectly enforced. This point implies that disciplines on R&D subsidies must be considered in tandem with issues of trade-related intellectual property rights.…”

R&D subsidy games: a cost sharing approach vs. reward for performance

“…country) selling to a third market. See Kujal andRuiz (2009), Liao (2007), and Kang (2006Kang ( , 2008. Otherwise they are quite similar in that R&D costs are quadratic; the three stage game is used, and so forth.…”

“…Gretz et al (2009), Liao (2007), and Kujal and Ruiz (2009) consider the cost sharing structure. Kind (2006, 2008), Kang (2006Kang ( , 2008, and DeCourcy (2005) consider the reward for performance structure. As far as we are aware, no one has compared funding structures, or indeed, noticed the fact that the two different structures exist in the literature.…”

Understanding Agreements on TRIPS and Subsidies in Tandem

“…Section 1 establishes an extended theoretical model from Spencer and Brander (1983) and Kang (2006), which enables us to consider R&D subsidies and IPR policy in tandem. In Section 2, we provide a theory on the TRIPS and SCM agreements and analyze the interaction between the two trade policy tools.…”

“…Based on the results of Kang (2006), we focus on the interaction between the strategic trade policy tools: R&D subsidization and IPR protection. We realize that in reality IPR protection is not perfect and the IPR regime can also affect firms' incentives to invest in R&D activities to the same extent that R&D subsidy policy affects these incentives.…”