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Abstract In an R&D cooperation with an innovation institution, the firm needs to design an efficient cooperation contract to enhance the cooperation efficiency under asymmetric information. Many governments encourage innovation through selective subsidies, whose review and supervision do disclose more information. However, the existing studies have ignored these impacts on designing R&D cooperation contracts. Thus, this paper constructs game models of R&D cooperation to obtain the optimal contract terms under different subsidy strategies and then further discusses the impacts of selective subsidy on R&D contract design.
Wu et al. (Sun,) studied this question.