Feasibility, Stability, and Multiple Research Joint Ventures
| Author | Bingyong Zheng,Zhiyong Yao |
| DOI | http://doi.org/10.1111/sjpe.12041 |
| Date | 01 May 2014 |
| Published date | 01 May 2014 |
FEASIBILITY, STABILITY, AND
MULTIPLE RESEARCH JOINT
VENTURES
Zhiyong Yao* and Bingyong Zheng**
ABSTRACT
We study multiple research joint ventures (RJVs) using a repeated game with
imperfect monitoring. Compared with the single joint venture case, we show that
cooperation in multiple joint ventures creates two advantages for participating
firms. First, by linking decisions together across all joint ventures firms can miti-
gate the likelihood of cooperation breakdowns following bad R&D outcomes.
Second, as the incentive cost to sustain cooperation is independent of the number
of joint ventures, the economy of scale effect reduces the efficiency loss due to
imperfect monitoring.
II
NTRODUCTION
Empirical studies have documented the phenomenon that the same pair or
group of firms simultaneously and continuously engage in many, rather than
a single research joint venture (RJV) (Vonortas, 2000; Snyder and Vonortas,
2005). In a dataset consisting of RJVs registered under the National Coopera-
tive Act (NCRA), Snyder and Vonortas (2005) show that three quarters of
these RJVs involve at least one pair of firms that also collaborate on another
RJV in the sample, and 44 distinct pairs of firms each cooperate on 30 or
more NCRA RJVs. For example, AT&T and IBM have set up a total of 38
RJVs; HP and IBM have worked together with 37 RJVs. Yet, few explana-
tions have been offered to account for these observations.
In this study, we provide a repeated game model with imperfect monitoring
to explain the phenomenon of multiple RJVs (MRJVs). In our model, two
firms establish RJVs to realize benefits from the complementarity of their
R&D resources. In the infinite-horizon model, they simultaneously decide to
work or shirk each period. They cannot observe each other’s actions, but the
outcomes of the RJVs, either good or bad, are observable at the end of each
period.
*School of Management, Fudan University
**School of Economics, Shanghai University of Finance and Economics
Scottish Journal of Political Economy, DOI: 10.1111/sjpe.12041, Vol. 61, No. 2, May 2014
©2014 Scottish Economic Society.
196
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