The Welfare Effects of the National Cooperative Research Act (NCRA) of 1984 and the National Cooperative Production Amendments (NCPA) of 1993

Abstract

. Cooperative R&D and production joint ventures may enable firms to achieve significant cost efficiencies. However, they can also be a means of controlling industry output and raising product prices. A review of the literature on the welfare implications of allowing rival firms to cooperate in the R&D and production stages indicates that the issue is controversial from a theoretical perspective. There is need to examine the motivations of R&D and production joint ventures in order to assess the welfare implications of the National Cooperative Research Act (NCRA) of 1984 and National Cooperative Production Amendments (NCPA) of 1993, which relaxed the antitrust treatment of R&D and production joint ventures. Using samples of 127 cooperative R&D joint ventures and 342 cooperative production joint ventures announced by U.S. domestic firms during 1979–1999, this article finds that these endeavors do not meet the criteria for collusive behavior specified by the market power doctrine. We interpret these findings as suggesting that cooperative R&D and production joint ventures are motivated by cost efficiencies and are, therefore, welfare enhancing. Our results pose some challenges to the doctrine that antitrust actions by regulatory authorities are always welfare improving.

Antitrust exemptions for joint R&D improve patents

“…Although R&D cooperation used to be as highly suspect by antitrust scholars (Jorde and Teece 1990), important policy changes took place in the US and Europe in the 1980s and 1990s, which led to a substantial increase in R&D cooperation. In addition to the substantial theoretical justification, the actual outcome has been deemed welfare enhancing as no evidence of subsequent collusion in the product market has been found (Liu et al 2007). However, it is also the case that the level of cooperation has been low in industries with strong IPRs, such as pharmaceuticals (Vonortas 1997).…”