Do Research Joint Ventures Serve a Collusive Function

Abstract

Every year thousands of …rms are engaged in research joint ventures (RJV), where all knowl- edge gained through R&D is shared among members. Most of the empirical literature as- sumes members are non-cooperative in the product market. But many RJV members are rivals leaving open the possibility that …rms may form RJVs to facilitate collusion. We ex- amine this by exploiting variation in RJV formation generated by a policy change that aects the collusive bene…ts but not the research synergies associated with a RJV. We use data on RJVs formed between 1986 and 2001 together with …rm-level information from Compustat to estimate a RJV participation equation. After correcting for the endogeneity of R&D and controlling for RJV characteristics and …rm attributes, we …nd the decision to join is impacted by the policy change. We also …nd the magnitude is signi…cant: the policy change resulted in an average drop in the probability of joining a RJV of 34% among telecommu- nications …rms, 33% among computer and semiconductor manufacturers, and 27% among petroleum re…ning …rms. Our results are consistent with research joint ventures serving a collusive function.