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Do research joint ventures serve a collusive function?

Author

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  • Michelle S. Goeree
  • Eric Helland

Abstract

Every year thousands of firms are engaged in research joint ventures (RJV), where all knowledge gained through R&D is shared among members. Most of the empirical literature assumes members are non-cooperative in the product market. But many RJV members are rivals leaving open the possibility that firms may form RJVs to facilitate collusion. We examine this by exploiting variation in RJV formation generated by a policy change that affects the collusive benefits but not the research synergies associated with a RJV. We use data on RJVs formed between 1986 and 2001 together with firm-level information from Compustat to estimate a RJV participation equation. After correcting for the endogeneity of R&D and controlling for RJV characteristics and firm attributes, we find the decision to join is impacted by the policy change. We also find the magnitude is significant: the policy change resulted in an average drop in the probability of joining a RJV of 34% among telecommunications firms, 33% among computer and semiconductor manufacturers, and 27% among petroleum refining firms. Our results are consistent with research joint ventures serving a collusive function.

Suggested Citation

  • Michelle S. Goeree & Eric Helland, 2009. "Do research joint ventures serve a collusive function?," IEW - Working Papers 448, Institute for Empirical Research in Economics - University of Zurich, revised Jul 2012.
  • Handle: RePEc:zur:iewwpx:448
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    File URL: http://www.econ.uzh.ch/static/wp_iew/iewwp448.pdf
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    Cited by:

    1. Fosfuri, A. & Helmers, C. & Roux, C., 2012. "Are joint patents collusive? Evidence from the US and Europe," Discussion Paper 2012-035, Tilburg University, Tilburg Law and Economic Center.
    2. Hinloopen, J. & Smrkolj, G. & Wagener, F.O.O., 2013. "In Defense of Trusts: R&D Cooperation in Global Perspective," CeNDEF Working Papers 13-05, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    3. Tannistra Banerjee & Stephen Martin, 2015. "Pharmaceutical Regulation and Innovative Performance: A Decision‐theoretic Model," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 36(3), pages 177-190, April.
    4. König, Michael & Liu, Xiaodong & Zenou, Yves, 2014. "R&D Networks: Theory, Empirics and Policy Implications," CEPR Discussion Papers 9872, C.E.P.R. Discussion Papers.
    5. Tomaso Duso & Lars-Hendrik Röller & Jo Seldeslachts, 2014. "Collusion Through Joint R&D: An Empirical Assessment," The Review of Economics and Statistics, MIT Press, vol. 96(2), pages 349-370, May.
    6. Tannista Banerjee & Ralph Siebert, 2013. "The Impact of R&D Cooperation on Drug Variety Offered on the Market: Evidence from the Pharmaceutical Industry," Auburn Economics Working Paper Series auwp2013-20, Department of Economics, Auburn University.
    7. Gianluca Femminis & Gianmaria Martini, 2008. "Extended RJV cooperation and social welfare," DISCE - Quaderni dell'Istituto di Teoria Economica e Metodi Quantitativi itemq0852, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    8. Normann, Hans-Theo & Rösch, Jürgen & Schultz, Luis Manuel, 2015. "Do buyer groups facilitate collusion?," Journal of Economic Behavior & Organization, Elsevier, vol. 109(C), pages 72-84.
    9. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, March.
    10. Erika Raquel Badillo & Rosina Moreno, 2014. "“Are R&D collaborative agreements persistent at the firm level? Empirical evidence for the Spanish case”," AQR Working Papers 201405, University of Barcelona, Regional Quantitative Analysis Group, revised Mar 2014.
    11. repec:eee:indorg:v:54:y:2017:i:c:p:89-124 is not listed on IDEAS
    12. Normann, Hans-Theo & Rösch, Jürgen & Schultz, Luis Manuel, 2014. "Do buyer groups facilitate collusion?," DICE Discussion Papers 74 [rev.], University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    13. 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.
    14. repec:zur:econwp:142 is not listed on IDEAS
    15. Ralph Siebert, 2013. "Are Ex Ante and Ex Post Licensing Agreements Useful Instruments to Lessen Uncertainty in R&D?," CESifo Working Paper Series 4535, CESifo Group Munich.

    More about this item

    Keywords

    Research and development; research joint ventures; antitrust policy; collusion;

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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