Handbook on the Economics and Theory of the Firm
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Handbook on the Economics and Theory of the Firm

Edited by Michael Dietrich and Jackie Krafft

This unique Handbook explores both the economics of the firm and the theory of the firm, two areas which are traditionally treated separately in the literature. On the one hand, the former refers to the structure, organization and boundaries of the firm, while the latter is devoted to the analysis of behaviours and strategies in particular market contexts. The novel concept underpinning this authoritative volume is that these two areas closely interact, and that a framework must be articulated in order to illustrate how linkages can be created.
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Chapter 35: R & D and Industrial Policy: Policies to Coordinate Investments in Research under Radical Uncertainty

Jean-Luc Gaffard, Sarah Guillou and Lionel Nesta


35 R&D and industrial policy: policies to coordinate investments in research under radical uncertainty Jean-Luc Gaffard, Sarah Guillou and Lionel Nesta 35.1 INTRODUCTION In the past decades, industrial policy has had to address fundamental issues like deindustrialization, growth of high-technology industries, export promotion, and inter alia, creation of national champions to go and compete on international markets (Maystadt, 2006). Industrial policy may be defined as a policy that aims at altering the existing allocation of resources between firms. Admittedly, this definition is extremely broad, and is likely to embody a large range of government objectives and policy tools. Subsidies, tax credit (e.g., conditioned on the level of research activities), public support to specific industries (e.g., support to the car industry in 2008–09 in most developed economies) are all examples of industrial policies. It is convenient to classify them as being either vertical, that is, dedicated to the support of specific industries, or horizontal, that is, supporting specific activities, which are transversal to all industries (e.g., exports). Clearly, research and innovation are transversal to all industries, so that policies supporting R&D activities are classified as horizontal industrial policy.1 R&D investments have had an ever increasing role in the performance of firms, industries and countries. We now commonly admit that competition is knowledge based, that is, science and technology as an additional production factor outplay the more conventional role of homogeneous labour and capital. For example, since the early 1980s, the number of (public or private) researchers per...

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