We consider a mixed quantity-setting oligopoly where firms can innovate to reduce their marginal cost of production. Besides, private firms may also reduce output competition through a collusive agree-ment. In this context, we obtain that collusion incentives are weaker due to R&D activities. We also investigate two different regulatory measures; (possibly partial) privatization and an output subsidy. In the latter case, we obtain that when firms innovate, the privatization neutrality result is not satisfied. Furthermore, a proper policy should include a partial privation where less competition between private firms calls for a weaker privatization scheme.