The R&D Incentives of Industry Leaders

  title={The R&D Incentives of Industry Leaders},
  author={Paul S. Segerstrom and James Zolnierek},
This paper presents a model to explain why industry leader firms often devote substantial resources to R&D activities and explores the welfare implications of this investment. The key new assumption is that industry leaders can improve their own products more easily than can other firms. When industry leaders have R&D cost advantages, it is optimal for the government to subsidize the R&D expenditures of all firms, subsidize the production expenditures of industry leaders, and tax the profits of… CONTINUE READING

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