The impact of public funding for innovation on firms' R&D investments: Do R&D cooperation and appropriability matter?

This paper provides a theoretical and empirical framework to explore how public funding affects firms' R&D investments depending on their engagement in horizontal R&D cooperations and different levels of ap- propriability conditions within the economy. It assumes firms' Cournot-Nash behavior in the choice of the optimal R&D investment level and provides empirical evidence in support of the theoretical ¯ndings using data on Spain and Germany from the Third Community Innovation Survey. Theoretical and empirical re- sults suggest that firms' cooperative behaviour and the appropriability conditions affect the relationship between public funding for innova- tion and R&D investments.