Antitrust, Innovation, and Competitiveness

By Thomas M. Jorde; David J. Teece | Go to book overview
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a significant market need. To succeed financially, innovative firms must quickly position themselves advantageously in the appropriate complementary assets and technologies. If they are not already integrated, the best solution often involves bilateral and multilateral cooperative agreements. 45

U.S. antitrust policy, like so much of our economic policy, has been preoccupied with static rather than intertemporal concerns. Despite important recent developments, it is informed by naive theories of the innovation process and, in particular, is insensitive to the organizational needs of innovation. U.S. antitrust scholars still harbor suspicion of cooperative agreements among competitors and do not appreciate the benefits. This suspicion fuels uncertainty about how the courts would view interfirm arrangements to promote technological progress and competition.

The policy changes we advance are certainly no panacea for the severe problems the U.S. high technology industry is experiencing currently. But in bringing American antitrust policy closer to Europe and Japan, we will at least purge the influence of dogma that no longer deserves a place in U.S. industrial policy. In time, reduced antitrust exposure will help clear the way for beneficial cooperation, thereby reducing incentives for mergers and acquisitions.

The centennial decade of the Sherman Act would be a good occasion to set things right. The economics profession, which in the past has had a significant impact on the law of vertical restraints, can provide the intellectual leadership necessary to propel adjustments in the horizontal area, thereby helping to align U.S. policies with the technological and competitive realities of today's global economy.


Portions of this chapter have been developed and published in Jorde and Teece, "Innovation, Cooperation and Antitrust: Balancing Competition and Cooperation," High Technology Law Journal 4:1 ( 1989); Jorde and Teece, "Acceptable Cooperation Among Competitors in the Face of Growing International Competition," Antitrust Law Journal 58:2 (Summer) ( 1989); and Jorde and Teece, "Innovation and Cooperation: Implications for Competition and Antitrust," Journal of Economic Perspectives, 4:3 ( 1990). This chapter also draws heavily on Teece ( 1986).

We are extremely grateful for financial support from the Alfred P. Sloan Foundation, the Smith-Richardson Foundation, the Pew Foundation, and the Sasakawa Peace Foundation. We wish to thank Joseph Stiglitz, Carl Shapiro, and Tim Taylor for valuable substantive and editorial comments. Bill Baxter, Oliver Williamson, and Dick Nelson made elpful comments on earlier drafts and oral presentations. We implicate none of the above in our conclusions.

For instance, cooperative R&D and related activities have been important to the success of the West German machine tool industry. The industry formed a strong association that has a research and teaching institute at Aachen. The West German industry has been described as "groups of clubs" ( Collis, 1988, p. 95) because of the nature of the cooperation displayed. The Italian machine tool industry around Modena is similarly organized, as is the Italian textile industry and the Danish furniture industry. A review of examples of cooperative activity abroad is part of the authors' ongoing research.


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