Market Share, R&D Cooperation, and EU Competition Policy
Richard R Ruble
EM Lyon (Ecole de Management de Lyon)
Bruno P. A. Versaevel
EM LYON (Ecole de Management de Lyon); University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE)
March 1, 2009
GATE Working Paper No. 09-10
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 show that existing theory does not support this market share criterion. Extending standard economic models so that a subset of firms participates in an R&D cooperation agreement while outsiders imitate, we show that the incentive to increase innovation depends on a complex set of effects. In particular, when the combined market share of parties to the agreement is high and firms choose R&D inputs, the negative outsider effect, which dampens the incentive to increase R&D spending, is less important so firms are more likely to perform more R&D. Moreover, in so-called “RJV cartels”, consumers always benefit from
R&D cooperation regardless of market shares.
Number of Pages in PDF File: 28
Keywords: R&D, Cooperative R&D, Regulation, Spillovers
JEL Classification: K21, L41, O38
Date posted: May 17, 2009 ; Last revised: January 4, 2012
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