A government that wants to increase welfare by subsidizing either an industry’s sales or process innovations or both has to account for possible changes of production, when firms can foresee the government’s actions. In an optimal control framework welfare can be increased by subsidizing...

This paper studies the innovation strategies of multi-product firms in industries with different scope for product differentiation. In a simple model of multi-product firms, we show that returns to product versus process innovation are industry-specific. Demand and cost linkages induce a natural...

In this paper, I investigate welfare gains associated with trade induced intra-firm adjustments of multi-product firms. To disentangle the welfare gains, I split up the R&D portfolio of a multi-product firm into three different channels: i) product innovation, ii) investments in the degree of...

In this paper, we incorporate offshoring of labor-intensive goods in a model with multi-product firms, and explore its implications in partial and general oligopolistic equilibrium. We identify important aspects of this phenomenon and argue that improvements in offshoring opportunities can...