Economic research on innovation has long discussed which policy instruments best foster innovativeness in individuals and organizations. One of the instruments easily accessible to policy-makers is innovation contests; however, there is ambiguous empirical evidence concerning how such contests...

This paper reconsiders the explanation of R&D subsidies by Spencer and Brander (1983) and others by allowing firms to license their innovations and to pool their R&D investments. We show that in equilibrium R&D joint ventures are formed and licensing occurs in a way that eliminates the strategic...