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Collusion Through Joint R&D: An Empirical Assessment

Tinbergen Institute Discussion Paper 10-112/1

41 Pages Posted: 9 Nov 2010  

Tomaso Duso

German Institute for Economic Research (DIW Berlin); Duesseldorf Institute for Competition Economics (DICE)

Lars-Hendrik Röller

ESMT European School of Management and Technology; Centre for Economic Policy Research (CEPR); WZB Berlin Social Science Center - Competitiveness and Industrial Change

Jo Seldeslachts

University of Amsterdam; Tinbergen Institute

Multiple version iconThere are 2 versions of this paper

Date Written: November 8, 2010

Abstract

This paper tests whether upstream R&D cooperation leads to downstream collusion. We consider an oligopolistic setting where firms enter in research joint ventures (RJVs) to lower production costs or coordinate on collusion in the product market. We show that a sufficient condition for identifying collusive behavior is a decline in the market share of RJV-participating firms, which is also necessary and sufficient for a decrease in consumer welfare. Using information from the US National Cooperation Research Act, we estimate a market share equation correcting for the endogeneity of RJV participation and R&D expenditures. We find robust evidence that large networks between direct competitors - created through firms being members in several RJVs at the same time - are conducive to collusive outcomes in the product market which reduce consumer welfare. By contrast, RJVs among non-competitors are efficiency enhancing.

Keywords: Research Joint Ventures, Innovation, Collusion, NCRA

JEL Classification: K21, L24, L44, D22, O32

Suggested Citation

Duso, Tomaso and Röller, Lars-Hendrik and Seldeslachts, Jo, Collusion Through Joint R&D: An Empirical Assessment (November 8, 2010). Tinbergen Institute Discussion Paper 10-112/1. Available at SSRN: https://ssrn.com/abstract=1706161 or http://dx.doi.org/10.2139/ssrn.1706161

Tomaso Duso (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany
+49 211- 81 10235 (Phone)
+49 211- 81 15499 (Fax)

HOME PAGE: http://sites.google.com/site/tomasoduso/home

Lars-Hendrik Röller

ESMT European School of Management and Technology ( email )

Schlossplatz 1
Berlin, 10178
Germany

HOME PAGE: http://www.esmt.org/eng/faculty-research/lars-hendrik-roeller/

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

WZB Berlin Social Science Center - Competitiveness and Industrial Change ( email )

Reichpietschufer 50
10785 Berlin
Germany
+49 30 2549 1440 (Phone)
+49 30 2549 1442 (Fax)

Jo Seldeslachts

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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