Strategic R&D policy with information lag

This paper studies strategic R&D policy with endogenous timing of firms’ moves within a two‐period framework. Within this framework the government can make a policy commitment only in the second period due to an information lag vis‐à‐vis the firms. The firms can, if they choose, make their moves in the first period, but they will incur extra costs. An activist government policy may decrease national welfare by forcing the foreign firm to take preemptive action against the home government.