Abstract: Under the opening circumstances,this paper analyzed a domestic firm and a foreign one’s R&D behavior and government’s subsidy policy.The results are as follows:first,when there exists little R&D intercommunication,the R&D investment of one firm will increase,and another will decrease;however,when there exists close R&D intercommunication,the two firms’ R&D investments will be promoted each other.Second,intercommunication between firms is necessary,and that will improve social welfare.Third,governments are inclined to subsidize domestic firms.

Key words: Cournot competition, R&D, government’s subsidy, technology cooperation