Endogenous Technology Sharing in R&D Intensive Industries

Abstract

This paper analyses endogenous formation of technology sharing coalitions with asymmetric firms. Coalition partners produce complementary technology advancements, although firms do not co-operate on R&D investment level or in the product market. The equilibrium coalition outcome is either between the two most efficient firms, or a coalition with all three firms. The two-firm coalition is the preferred outcome of a welfare maximising authority if ex ante marginal cost is sufficiently high, and the three-firm coalition is preferred otherwise. Furthermore, we show that the equilibrium outcomes result in the lowest total R&D investment of all possible outcomes. Aircraft engine manufacturing provides a case study, and indicates the importance of antitrust issues as an addition to the theory.

Perspectives on the Knowledge-Based Society. An Introduction to the Special Issue

“…As in the empirical study by Roller et al (2007), Clark and Sand (2010) find that asymmetric firms are less likely to join together to form a joint venture. Their results also are consistent with Gugler and Siebert's (2007) empirical observation that larger firms are more likely to participate in research joint ventures.…”

“…Their results also are consistent with Gugler and Siebert's (2007) empirical observation that larger firms are more likely to participate in research joint ventures. On the other hand, Clark and Sand (2010) find that, while the insiders cut their research efforts somewhat and the outsider increases research, the total effect tends to drive industry costs apart when only the more efficient firms join in a venture. Contrary to the findings of Roller et al (2007), this effect increases industry asymmetry when research joint ventures are present, raising industry profits but also those of the insiders.…”

“…Indeed, her work generates a set of specific design recommendations for parks. Clark and Sand (2010) find that research joint ventures may emerge endogenously only among similarly-and relatively-efficient firms. As these are also the larger firms in the industry, and as the ventures tend to be welfare improving, an implication is that policy restrictions on the market shares of firms in research joint ventures may not be optimal.…”

“…Knowledge can pass from one organization to another in a variety of ways, including via mergers (Ang and Wu, 2011;Jost and Van de Velden, 2006), sale or licensing (Anton and Yao, 2002;Buenstorf and Geissler, 2009), technology pools (Lerner and Tirole, 2004;Lerner et al, 2007), open source protocols (Lerner and Tirole, 2002), joint investment projects (Goyal et al, 2003), demonstrations (Gill, 2008), inter-organizational spillovers (De Bondt, 1997) and research joint ventures (Amir et al, 2003;Suzumura, 1992;Roller et al, 2007). Three of the papers in this volume, Cassiman et al (2010), Squicciarini (2010) and Clark and Sand (2010) study aspects of spillovers.…”

“…In sum, it is not the list of factors but rather their precise combination and weighting that generates the variety of conclusions about policy and the benefits of the specific research joint venture or other cooperative designs found in this literature. 2 As an illustration of how these factors can be combined to answer new questions, in this volume Clark and Sand (2010) examine not so much whether research joint ventures form but rather who chooses this option when spillovers are present. Venture participants take full advantage of any technological advancement discovered by a partner, but undertake research investment decisions non-cooperatively.…”