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A Homogeneous Industry Model of Resource Allocation to Basic Research and Its Policy Implications

Author

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  • Prafulla Joglekar

    (Department of Management, La Salle University, Philadelphia, Pennsylvania 19141)

  • Morris Hamburg

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

Abstract

In a recent paper we showed that unaided industry allocation to basic (inappropriable) research is suboptimal and that in stimulating this allocation, provision of government seed money is generally counterproductive, while the provision of matching subsidies is not cost-efficient. Here we consider a special case of the model developed in the earlier paper (i.e., we now consider a homogeneous industry) and investigate the effects of several relevant factors upon an industry's allocation of resources to basic research. An extensive numerical example is presented that helps to verify and to interpret the model in realistic terms. Our findings question the validity of a number of popular beliefs about the need for government support of basic research in various types of industries. For example, contrary to popular belief, the greater the risk aversion displayed by member firms in an industry, the lesser may be the need for government support of its basic research. Also, the larger the number of firms in an industry the greater may be the need for government support of that industry's basic research.

Suggested Citation

  • Prafulla Joglekar & Morris Hamburg, 1986. "A Homogeneous Industry Model of Resource Allocation to Basic Research and Its Policy Implications," Management Science, INFORMS, vol. 32(2), pages 225-236, February.
    • Handle: RePEc:inm:ormnsc:v:32:y:1986:i:2:p:225-236
    DOI: 10.1287/mnsc.32.2.225
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    Cited by:

    1. Joglekar, Prafulla & Hamburg, Morris, 1996. "Conditions for government support of private research and development," European Journal of Operational Research, Elsevier, vol. 94(3), pages 626-630, November.

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