The welfare effects of industrial policy can vary depending where the targeted industry happens to be in its lifecycle. In this study, I develop an open economy macroeconomic model that incorporates industry lifecycle theory to investigate how the timing of industrial policy affects innovation, productivity, and welfare in both domestic and foreign countries. The model provides different welfare implications in two cases: catch-up and frontier technology races. In the former case, the targeted industry is young and has high growth potential at home but is mature abroad, while in the latter case, both domestic and foreign industries have high growth potential and are competing with each other. For the home country, a production subsidy hastens innovation in the targeted industry and thus can increase welfare in both cases, even though there may be a trade-off between short-run loss and long-run gain. For the foreign country, in the catch-up case, a home production subsidy unambiguously increases foreign welfare. In contrast, in the case of frontier technology races, it may have a beggar-thy-neighbor effect by delaying innovation abroad. In such circumstances, aggressive countervailing policies will be implemented by the foreign country to mitigate the negative spillover effects. If both countries cooperatively support the industry, the welfare outcome can be a Pareto improvement compared to the Nash equilibrium.