Abstract
In this paper, we investigate the stock price responses of listed firms in the U.S. markets to announcements of R & D collaborations. We find that abnormal returns of stocks are significantly positive after R & D collaborations are announced. The positive stock price response towards the R & D cooperation initiations can be partially explained by the nature of the collaborations and the characteristics of the participating firms. We also find that the stock prices of rival firms respond negatively to announcements of R & D cooperation. This result seems to support the hypothesis that cooperative R & D improves economic efficiency of the cooperative firms that gain competitive advantage. We do not find evidence supporting the hypothesis that R & D cooperation creates collusive, anticompetitive effects in the product market.
Similar content being viewed by others
References
Baumol, William (1992) 'Horizontal Collusion and Innovation', Economic Journal, 102(1), 129-137.
Baumol, William (1991) 'Technology Sharing Cartel, Speed of Technology Transmission and the Market Mechanism', Working Paper.
Bernheim, B. Douglas, and Michale Whiston (1990) 'Multimarket Contact and Collusive Behavior', Rand Journal of Economics, 21, 1-26.
Boehmer, Ekkehart, Jim Musumeci, and Annette Poulsen (1991) 'Event-Study Methodology under Conditions of Event-Induced Variance', Journal of Financial Economics, 30, 253-272.
Brodley, Joseph (1990) 'Antitrust Law and Innovation Cooperation', Journal of Economic Perspectives, 4(3), 97-112.
Brown, Stephen, and Jerold Warner (1985) 'Using Daily Stock Returns: The Case of Event Studies', Journal of Financial Economics, 14, 3-31.
d'Aspremont, Claude, and Alexis Jacquemin (1988) 'Cooperative and Non-Cooperative R&D in Duopoly with Spillovers', American Economic Review, 78, 1133-1137.
De Bondt, Raymond, Patric Slaets, and Bruno Cassiman (1992) 'The Degree of Spillovers and the Number of Rivals for Maximum Effective R&D', International Journal of Industrial Organization, 10(1), 35-54.
Eckbo, B. Espen (1983) 'Horizontal Mergers, Collusion, and Stockholder Wealth', Journal of Financial Economics, 11, 241-273.
Eckbo, B. Espen (1985) 'Mergers and the Market Concentration Doctrine: Evidence from the Capital Market', Journal of Business, 58(3), 325-349.
Fama, Eugene and Kenneth French (1992) 'The Cross-Section of Expected Stock Returns', Journal of Finance, 47(2), 427-465.
Farrell, Joseph, and Carl Shapiro (1990) 'Horizontal Mergers: An Equilibrium Analysis', American Economic Review, 80, 107-127.
Geroski, Paul (1993) 'Antitrust Policy Towards Cooperative R&D Ventures', Oxford Review of Economic Policy, 9(2), 58-71.
Griliches, Zvi (1984) R&D, Patent, and Productivity. Chicago: The University Chicago Press.
Kamien, Morton, Eitan Muller, and Israel Zang (1992) 'Research Joint Ventures and R&D Cartel', American Economic Review, 82, 1293-1306.
Katz, Michael (1986) 'An Analysis of Cooperative Research', Rand Journal of Economics, 17(4), 527-543.
Katz, Michael, and Janusz Ordover (1990) 'R&D Cooperation and Competition', Brookings Papers on Microeconomics, 137-203.
Lach, Saul and Mark Schankerman (1989) 'Dynamics of R&D and Investment in Scientific Sector', Journal of Political Economy, 97(4), 880-904.
McConnell, John, and Timothy Nantell (1985) 'Corporate Combinations and Common Stock Returns: The Case of Joint Ventures', Journal of Finance, 40(2), 519-536.
Murphy, William (1991) R&D Cooperation Among Marketplace Competitors. New York: Quorum Books.
OECD (1986) OECD Science and Technology Indicators: R&D, Investment and Competitiveness. Paris: OECD Publications.
Pakes, Ariel (1985) 'On Patents, R&D and the Stock Market Rate of Return', Journal of Political Economy, 93(2), 390-409.
Salant, Stephen, Sheldon Switzer, and Robert Reynolds (1983) 'Losses from Horizontal Merger: The Effect of an Exogenous Change in Industry Structure on Cournot—Nash Equilibrium', Quarterly Journal of Economics, 98, 185-199.
Scott, John T. (1988) 'Diversification Versus Co-Operation in R&D Investment', Managerial & Decision Economics, 9(3), 173-186.
Scott, John T. (1991) 'Multimarket Contact among Diversified Oligopolists', International Journal of Industrial Organization, 9(2), 225-238.
Steurs, Geert (1995) 'Interindustry Spillovers: What Difference Do They Make', International Journal of Industrial Organization, 13(2), 249-276.
Teece, David (1992) 'Competition, Cooperation, and Innovation', Journal of Economic Behavior and Organization, 18(1), 1-25.
Van Hippel, Eric (1988) The Sources of Innovation. Oxford: Oxford University Press.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Wu, C., Wei, K.J. Cooperative R&D and the Value of the Firm. Review of Industrial Organization 13, 425–446 (1998). https://doi.org/10.1023/A:1007761717501
Issue Date:
DOI: https://doi.org/10.1023/A:1007761717501