Product market objectives and the formation of research joint ventures

Abstract

In this paper we extend the existing literature on research and development (R&D) investments and research joint ventures (RJVs) in two important ways. First, we analyze and compare the case where firms collude in the product market to the benchmark case of competition in the output market. Second, we allow firms to form coalitions endogenously as a separate stage in the game. We develop profit functions that depend on the partition of firms into joint ventures and the nature of product competition between venture partners. Our results illustrate the restrictive nature of some assumptions made in the literature. Typically multiple RJVs of different sizes form in equilibrium. In general, RJVs should not be promoted if they entail product market collusion. Given the information available to policy-makers, it is unlikely that an R&D policy more refined than analyzing and allowing RJVs on a case-by-case basis is feasible.

In Defense of Trusts: R&D Cooperation in Global Perspective

“…Obviously, collusion in the product market yields higher total surplus if colluding firms develop an initial technology and arrive at the saddle-point steady state while firms that compete in the product market would not develop the technology at all. Formally, 22 Proposition 7. Whenever both scenarios have an indifference point above the choke price, the full collusion scenario yields higher consumer surplus and total surplus than the partial collusion scenario for all initial technologies in between the two indifference points.…”

“…Product market collusion can also yield higher total surplus if colluding firms arrive at the 22 The proof of Proposition 7 follows trivially from the fact that i) for all values of c above the indifference point in the region where c ≥ 1, both q = 0 and k = 0 for all t ∈ [0, ∞), and ii) for all values of c below the indifference point, Π > 0 and, sooner or later, also q > 0 as t → ∞. saddle-point steady state while firms that compete in the product market would select the exit trajectory.…”

“…The channels through which cooperation in R&D facilitates product market collusion have been examined in a number of theoretical studies (Martin (1995), Greenlee and Cassiman (1999), Cabral (2000), Lambertini et al (2002), Miyagiwa, 2009). According to Fisher (1990, p. 194…”

Technology proximity between firms and universities and technology transfer

“…Why should they do so? Firstly, they can create a greater amount of "incoming spillovers" (see Shapiro and Willig, 1990;Greenlee and Cassiman, 1999) to modify their knowledge base and to update knowledge and to enlarge their research networks. Secondly, such contacts make it easier to recruit graduates or refiled patent(s).…”

Research and Development Cooperatives and Market Collusion: A Global Dynamic Approach

“…The channels through which cooperation in R&D facilitates product market collusion have been examined in a number of theoretical studies [11][12][13][14][15]. According to Fisher [16, p. 194…”