R&D, Innovation and the Policy Mix

The policy mix concept provides policymakers with a conceptual framework that allows them to consider the design of an optimal set of instruments supporting R&D and innovation. Optimal in this respect refers to effectiveness in changing behavior of firms regarding investment in research, and efficiency concerning the cost of the intervention. In practice, little is known about the performance of an instrument in comparison to other tools. In this thesis we therefore formulate a theoretical framework for the selection of instruments supporting industry-oriented research, which contributes to the formulation of an optimal policy mix. We focus on instruments providing funding, tax measures, loans and regulations aimed at creating collaboration in research. We apply this framework for different forms of competition (i.e. Cournot and Bertrand for a market with homogeneous products, and with differentiated products). We extend the potential application of our results by analyzing the effectiveness of collaboration in R&D for a hybrid market form of perfect and monopolistic competition. We also apply different decision models to describe the behavior of firms concerning their investment in research, in order to assess the efficiency of instruments providing financial contribution to research projects.

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