Korea Trade Review (무역학회지)

Korea Trade Research Association (한국무역학회)
권호 표지
DOI QR코드

DOI QR Code

Does the R&D Subsidy of Developing Countries Overcome the First Mover Advantage of Foreign Firm?

후발국의 보조금정책은 외국기업의 선도자의 이익을 극복하는가?

  • Li Kim (Department of International Business, Chungbuk National University) ;
  • Sang-Kee Kim (Department of International Business, Chungbuk National University)
  • 김리 (충북대학교 국제경영학과) ;
  • 김상기 (충북대학교 국제경영학과)
  • Received : 2022.10.10
  • Accepted : 2022.10.30
  • Published : 2022.10.30
Download PDF
⟨ Previous Next ⟩

Abstract

The Chinese government has been promoting core industries in accordance with the 'Made in China 2025'. As a result of injecting huge subsidies to develop core industries, a great success has been achieved in the electric vehicle and battery industry, however, the semiconductor industry has almost no performance. This study aims to examine whether the subsidy policy of a developing country helps their own domestic firm to overcome the first mover advantage of an advanced country's firm. From the game theoretical analysis, the results have shown that the subsidy policy of the developing country's government creates the profits shifting effect which arises from the developed country's firm to the developing country's firm. When there exists R&D efficiency gap between the two firms, however, most of these profit shifting effects are offset, which implies that the subsidy policy of developing countries is likely to fail.

Keywords

References

  1. Lee, Sung-Kyu (2010), "Optimal Trade Policy in Export Subsidy under Learning-by-Doing and Concave Cost", Korea Trade Review, 35(3), 313-338.
  2. Lee, Jong-Min (2014), "Optimal Export Subsidy under Lobbying - Strategic Subsidy Policy Revisited", Korea Trade Review, 39(1), 265-292.
  3. Brander, J. A., and B. J. Spencer (1985), "Export Subsidies and International Market Share Rivalry", Journal of International Economics, 18(1-2), 83-100. https://doi.org/10.1016/0022-1996(85)90006-6
  4. Cooper, R., and R. Riezman (1989), "Uncertainty and the Choice of Trade Policy in Oligopolistic Industries", The Review of Economic Studies, 56(1), 129-140. https://doi.org/10.2307/2297754
  5. Haaland, J. I., and H. J. Kind (2008), "R&D Policies, Trade and Process Innovation", Journal of International Economics, 74(1), 170-187.
  6. Leahy, D., and J. P. Neary, (1997), "Public Policy towards R&D in Oligopolistic Industries", The American Economic Review, 642-662.
  7. Mayer, W., and R. G. Riezman (1987), "Endogenous Choice of Trade Policy Instruments", Journal of International Economics, 23(3-4), 377-381.
  8. Pires, A. J. G. (2009), "R&D and Endogenous Asymmetries between Firms", Economics Letters, 103(3), 153-156. https://doi.org/10.1016/j.econlet.2009.03.007
  9. Pires, A. J. G. (2015), "Competitiveness-shifting Effects and the Prisoner׳s Dilemma in International R&D Subsidy Wars", International Economics, 142, 32-49. https://doi.org/10.1016/j.inteco.2015.01.002