Do direct R&D subsidies lead to the monopolization of R&D in the economy?

The market for R&D is subject to market failure which leads to an underprovision of R&D from a social point of view. This gives rise for governmental intervention in the market for R&D. For decades, the predominant question in the literature on R&D subsidy has been on potential crowding-out effects. There is some concern that subsidy recipients simply substitute public for private investment so that the subsidy would not generate any additional R&D efforts. The more recent microeconomic literature on the effects of R&D subsidies, however, goes beyond the question of crowding out. This paper also makes a contribution into this direction. A question that has never been investigated so far is the effect of R&D subsidies on the distribution of R&D effort in the economy. The distribution of R&D bears important insights for policy makers and academics studying market structure and/or economic growth. Some work in the field of endogenous growth theory has suggested that R&D subsidies have an important influence in the concentration of R&D in the economy and eventually also persistent dominance of market leaders and thus on log-ru