Beat 'em or join 'em? Export subsidies versus international research jointventures in oligopolistic markets

We compare adversarial with cooperative industrial and trade policies in a dynamic oligopoly game in which a home and foreign firm compete in R&D and output and because of spillovers, each firm benefits from the other's R&D. When the government can commit to an export subsidy, such a policy raises w elfare relative to cooperation, except when R&D is highly effective and spi llovers are near-complete. Without commitment, however, subsidisation may y ield welfare levels much lower than cooperation and lower even than free tr ade, though qualifications to the dangers from no commitment are noted.