We show that the presumed incompatibility of uncoordinated R&D and competition is not fundamental, but hinges on the nature of R&D spillovers. As a consequence, R&D subsidies may be more effective than previously thought.

We characterize asymmetric equilibria in two-stage process innovation games and show that they are prevalent in the different models of R&D technology considered in the literature. This leads to a reassessment of the potential benefits of research cooperative agreements. Indeed, cooperation in...