Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
Our concern in this paper is with firm‐specific industrial policy. When R&D subsidies or taxes are differentiated among firms, the question arises as to which firms in an industry should receive such support. We analyze a situation where firms differ in their R&D technologies in two distinct ways: in the costs of performing R&D activities and in the output obtained from such activities. We find that the optimal firm‐specific industrial policy is affected differently by the two sources of firm heterogeneity. Furthermore, a change in a firm's R&D productivity has an ambiguous effect on the optimal policy towards the firm. JEL classification: O31; L52; F13