R & D Strategy in International Mixed Duopoly with Research Spillovers

This paper examines the international mixed duopoly behaviour with research spillovers. Using a two‐stage game with Research and Development ( R & D ) and output, we investigate the effects of imperfectly appropriable R & D on optimal R & D strategies of a domestic public firm and a foreign private firm across different market interactions: (i) international R & D competition, (ii) only the foreign firm conducts R & D , (iii) only the domestic public firm conducts R & D , (iv) no firm conducts R & D , and (v) research joint venture. The results show that firms' research performances are determined by the degree of spillovers and the optimal R & D strategies involve R & D competition. Spillovers are shown to be socially beneficial and their absence can prove to be a strategic deterrent, with the public firm monopolising the market. Some of these findings contrast with the traditional models of oligopoly (with or without R & D ) and mixed oligopoly (without R & D ).