Market Share, R&D Cooperation, and EU Competition Policy

GATE Working Paper No. 09-10

28 Pages Posted: 17 May 2009 Last revised: 4 Jan 2012

Richard R Ruble

EM Lyon (Ecole de Management de Lyon)

Bruno P. A. Versaevel

emlyon business school; GATE (Groupe d'Analyse et de Théorie Economique)

Date Written: March 1, 2009

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 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.

Keywords: R&D, Cooperative R&D, Regulation, Spillovers

JEL Classification: K21, L41, O38

Suggested Citation

Ruble, Richard R and Versaevel, Bruno P. A., Market Share, R&D Cooperation, and EU Competition Policy (March 1, 2009). GATE Working Paper No. 09-10. Available at SSRN: https://ssrn.com/abstract=1405342 or http://dx.doi.org/10.2139/ssrn.1405342

Richard R. Ruble (Contact Author)

EM Lyon (Ecole de Management de Lyon) ( email )

23 Ave Guy de Collongue
Ecully, 69134
France

Bruno P. A. Versaevel

emlyon business school ( email )

23, avenue Guy de Collongue
Economics, Finance, Control
Ecully, 69130
France

GATE (Groupe d'Analyse et de Théorie Economique) ( email )

93, chemin des Mouilles
Ecully, 69130
France

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