This paper provides a framework with which to model one of the key links between universities andindustry – the undertaking of applied research. We assume that the fundamental objective of universities isto undertake fundamental research and that they receive public funding to do so....

We introduce pollution, as a by-product of production, into a non-tournament model of R&Dwith spillovers. Technology policy takes the form of either R&D subsidisation or pre-competitiveR&D cooperation. We show that, when the emissions tax is exogenous, the optimal R&Dsubsidy can be negative,...