The US government has decidedly moved towards encouraging co-operation in research and development (R&D) between firms, universities, and other research institutes since the early 1980s. The Republican Administration in the early 1980s set the stage for a radical shift in market environment...

Empirical examination of whether R&D subsidies to private firms crowd out private investments has been hampered by problems related to selection. A particular worry is that research intentions and the quality of current research ideas may be correlated with the likelihood of applying for and...