Review of Industrial Organization 15: 263–281, 1999.
© 1999 Kluwer Academic Publishers. Printed in the Netherlands.
How do Participants in Research Joint Ventures
NICHOLAS S. VONORTAS
Department of Economics and Center for International Science and Technology Policy, The George
Washington University, 2013 G Street, N.W., Washington D.C. 20052, U.S.A.
Abstract. This paper investigates the incentives to participate in research joint ventures from the
perspective of overall business diversiﬁcation behavior. It presents evidence that: (a) RJVs tend to
put together industrial activities differently than single ﬁrms; and, (b) the diversiﬁcation decisions of
RJV participants are triggered partly differently than the analogous decisions of ﬁrms that have not
participated in the examined large set of RJVs. The results indicate that RJVs facilitate “experimen-
tation.” They also indicate that the policy debate on inter-ﬁrm cooperation in R&D must consider the
likely differences in strategic behavior between frequent RJV participants and other ﬁrms.
Key words: Research joint ventures, cooperation, R&D, diversiﬁcation.
Some of the most interesting questions in industrial economics relate to the pattern
of business diversiﬁcation. Why do ﬁrms expand into new product markets? What
mechanisms do they use to diversify? What factors inﬂuence the incentives and
scope of diversiﬁcation? What are the policy implications of business expansion?
Firms diversify either by expanding internally – developing new capabilities on
their own or buying into them – or by expanding “virtually” through cooperation.
An extensive literature on internal diversiﬁcation
has basically categorized the
incentives into three groups (Montgomery, 1994): (i) Expectations for additional
proﬁt via increased market power due to cross-subsidization between markets, mu-
tual forbearance among competitors in various markets, and collusion to foreclose
This research was funded by the U.S. National Science Foundation (grant SRS-9510909). The
skilled assistance of Yongsuk Jang is acknowledged. I want to thank the students participating in
various graduate seminars at GWU for their excellent insights. Thanks also go to the participants in
sessions of the 1997 meetings of the Eastern Economic Association and the European Association
for Research in Industrial Economics and a seminar at the National Technical University of Athens.
John Kwoka and Robert Phillips have provided helpful comments on earlier versions of this material.
John Scott and an anonymous referee of this Journal made very useful suggestions. All remaining
mistakes are, of course, mine.
See Montgomery (1994) and Scott (1993) for reviews of the industrial economics literature on