Endogenous Formation of Competitive Research Sharing Joint Ventures*

Abstract

Research sharing is an important objective of many research joint ventures. When partners share R&D but do not maximize joint profits, large consortia are more profitable than small ones, and joint ventures prefer dispersed rivals. For much of the spillover space, a coalition formation game that permits limited membership predicts that at most, three joint ventures form. Research‐sharing joint ventures improve welfare when spillovers are low, and banning research sharing joint ventures is beneficial for high spillovers. With imperfect research sharing and low spillovers, allowing only research sharing is the best industry‐wide joint venture alternative for consumer surplus.

Joint ventures in patent contests with spillovers and the role of strategic budgeting

“…15 And third, while, in general, a firm's optimal R&D effort depends on the research efforts and affiliations of all rival firms, a comprehensive analysis of competing RJVs in the context of process innovations is too complicated whereas in Jost (2010) a complete characterization of firms' equilibrium R&D efforts and profits for arbitrary industry partitions is possible. 16 14 See, for example, Greenlee and Cassiman (1999), Yi and Shin (2000), Morasch (2000) or Greenlee (2005). 15 The nature of market competition therefore has an important effect on the endogenous formation of coalitions which is in line with the result in Goyal and Joshi (2003) who show that, if competition is in prices, the empty network in which no firm cooperates will be the unique stable network.…”

“…This result on the optimal size of competing RJVs differs from most of the findings in the literature on endogenous formation of R&D coalitions. 14 In Greenlee (2005), for example, larger research sharing RJVs earn higher profits, and benefit from the dispersion of rival firms across many small ventures. When joint ventures set jointly optimal research efforts, Yi and Shin (2000) establish that without research sharing firms benefit from having few partners and rival firms are organized in large RJVs.…”

“…15 The nature of market competition therefore has an important effect on the endogenous formation of coalitions which is in line with the result in Goyal and Joshi (2003) who show that, if competition is in prices, the empty network in which no firm cooperates will be the unique stable network. 16 For research sharing joint ventures, Greenlee and Cassiman (1999) and Greenlee (2005) consider arbitrary industry partitions but assumes Cournot interaction, linear demand, and quadratic R&D costs to keep the analysis tractable. The analysis is less complicated for the case of joint profit maximization where firms' optimal R&D efforts depend only on aggregate R&D effort in the industry and not on the composition of other firms' investments.…”

Market Power and Incentives to Form Research Consortia

“…They show that strategic alliances need not be anticompetitive; thus banning these alliances may lead to a more concentrated market structure. Greenlee (2002) focuses on the welfare aspect of research sharing joint ventures. He shows that RVJs improve welfare when spillovers are low, and banning RJVs is beneficial for high spillovers.…”

Designing input prices to motivate process innovation

“…10 The technological spillovers flow in a single direction in our model since all innovation is undertaken by a single firm. Models of research joint ventures (e.g., D'Aspremont and Jacquemin, 1988; Kamien et al, 1992;Greenlee, 2005) consider more general patterns of technological spillovers by allowing multiple firms to choose research and development levels (either independently or in concert). However, these models typically take the level of technological spillover to be exogenous.…”