Author(s):
Manoj Kumar^1a, Jyoti Raman^1b, Priya Raman^1c

Author Affiliation:
¹International Engineering Services, H.No.- 87A, RZI – Block, West Sagarpur

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This paper attempts to examine the product innovation by R&D subsidies policies in a supply chain by supplier. This study derives a model for a supplier’s product innovation R&D subsidies policy. The product innovation of supplier can contribute to the long-term competitiveness for the supply chain. For many supply chains, product innovation is a major factor, and it should be considered in the development of strategies for a supplier. In this paper, we study whether there is scope for using R&D subsidies to smooth out obstacles to R&D performance for product innovation and expand the share of R&D to suppliers. To this end we consider a dynamic model with sunken entry costs in which supplier optimal participation strategy is defined in terms of two subsidy thresholds that characterise entry and continuation. A survey result in India is studied whether there is scope for using R&D subsidies to smooth out obstacles to R&D performance for product innovation and expand the share of R&D to suppliers. We are able to compute the subsidy thresholds from the estimates of a dynamic panel data type-2 to bit model for an unbalanced panel of about 3,000 Indian suppliers. The results suggest that extensive R&D subsidies (i.e., subsidies on the extensive margin) are a feasible and efficient tool for expanding the share of R&D for product innovation by suppliers.

KEYWORDS:
Indian Suppliers, R&D subsidies policies, product innovation, sunk cost, dynamic models