Competitive and Harmonised R&D Policies for International R&D Alliances involving Asymmetric Firms

We examine research and development (R&D) policies when a national firm forms an R&D alliance with a foreign competitor. Firms differ in their R&D capabilities, and adopt a profit-sharing rule when R&D decisions are coordinated. National R&D tax/subsidy policies are set independently or harmonised. When firms coodinate their R&D decisions and governments choose R&D policies independently, R&D taxes are chosen. But there is no intervention if policies are harmonised. These policy outcomes affect the types of R&D alliance choosen. Agreements to share R&D information may be preferred to those combining coordination of R&D decisions and information sharing because of the R&D tax that coordination attracts.