Multimarket contact and inter-firm cooperation in R&D

Nicholas S. Vonortas

pp. 249-277

in: Dennis C. Mueller, UWE Cantner (eds), Capitalism and democracy in the 21st century, Heidelberg, Physica, 2001

Abstract

Research joint ventures (RJVs) have been widely acclaimed for their alleged ability to restore private incentives to undertake R&D. Economists have, however, also sounded the alarm concerning the opportunities RJVs may create for collusion between partners. The danger of anti-competitive behavior increases significantly when repeated R&D collaboration occurs between firms that also "meet" in many product markets. This phenomenon is shown to be present in a large set of U.S.-based RJVs. The question is about the incentive trade-off: Are the alleged advantages of RJVs in terms of enhancing incentives for R&D sufficient to overcome the potential disadvantages in terms of decreasing incentives for R&D due to simultaneous multiproject and multimarket contact? Significant foreign participation, high technological and market uncertainties, and the set up of "porous' RJVs may operate as a check to anti-competitive behavior.