"In order to understand collaborative research activity in the United States, it is important to understand the contextual environment in which firms pursue a collaborative research strategy. The U.S. environment for formal collaborative research was established through a number of policy...

We reconsider the justifications of R&D subsidies by Spencer and Brander (1983) and others by allowing firms to pool R&D investments and license innovations. In equilibrium R&D joint ventures are formed and licensing occurs in a way that eliminates the strategic benefits of R&D investment in the...