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Market shares, R&D agreements, and the EU block exemption

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  • Ruble, Richard
  • Versaevel, Bruno

Abstract

Regulation (EC) No 1217/2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of R&D agreements exempts horizontal R&D agreements from antitrust concerns when the combined market share of participants is low enough. We examine the theoretical basis for this criterion by extending existing models so that a subset of firms innovates and participates in an R&D cooperation agreement. We show that the incentive to increase innovation depends on a complex set of effects. We identify one, the outsider effect, that can lead firms to increase R&D under cooperation precisely when their combined market share is high. In a general model in which all firms innovate, we also find that R&D agreements can be more beneficial at higher market shares. We argue that existing theory therefore does not support limiting the exemption to low market shares.

Suggested Citation

  • Ruble, Richard & Versaevel, Bruno, 2014. "Market shares, R&D agreements, and the EU block exemption," International Review of Law and Economics, Elsevier, vol. 37(C), pages 15-25.
  • Handle: RePEc:eee:irlaec:v:37:y:2014:i:c:p:15-25
    DOI: 10.1016/j.irle.2013.04.008
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    More about this item

    Keywords

    R&D; Cooperative R&D; Regulation; Spillovers;

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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