How to promote R&D cooperation and R&D investment?

On the one hand, it is uncertain for firms to believe whether they benefit from keeping an ambivalent attitude towards R&D cooperation supported by government, causing a strategic dilemma of R&D cooperation. We investigate decision making in terms of maintaining or betraying R&D cooperation in high and low R&D intensity firms. Based on stochastic evolutionary game theory, we develop a novel decision-making model for betrayal or continuation of R&D cooperation grounded on five factors: knowledge spillovers, absorptive capacity, R&D subsidies, synergy effects, and R&D coordination costs. We empirically test the model for 383 Chinese firms listed in the period 2015-2019 and evaluate the effectiveness of 19,683 combinations of these five factors. Our findings suggest that ⅰ) low R&D intensity firms will adopt a “first mover” strategy; ⅱ) a coordinated five factors has a positive effect on promoting R&D cooperation between heterogenous firms; ⅲ) the worst factors combination may instantly break the R&D cooperation, while there is a waiting period for the optimal factors combination to promote R&D cooperation. On the other hand, public R&D subsidies have been widely used to promote firm level R&D investment. However, there’s growing evidence that the relation between R&D subsidies and firm level R&D investment follows an inverted U-shaped curve. We rely on the classical model of signaling theory that reports both positive and negative signals from R&D subsidies, and add mediating effects of external investment and moderating of effects of rent-seeking costs, government regulation, and state ownership to gain deeper insights in the inverted U-shape relation between subsidies and investment. We employ a panel data of listed manufacturing enterprises in China in the period 2015-2019. We confirm the inverted U-shaped relationship between R&D subsidies and firm R&D investment and demonstrate a significant mediating effect of external investment, and a weakened relationship by rent-seeking cost and government regulation.