Innovation, Cooperation, and Antitrust
THOMAS M. JORDE AND DAVID J. TEECE
Nobel Laureate Robert Solow and his colleagues on MIT's Industrial Productivity Commission recently noted: "Undeveloped cooperative relationships between individuals and between organizations stand out in our industry studies as obstacles to technological innovation and the improvement of industrial performance" and that "interfirm cooperation in the U.S. has often, though not always, been inhibited by government antitrust regulation" ( Dertouzos, Lester, and Solow, 1989, pp. 7, 105). These striking conclusions warrant further exploration.
Unfortunately, industrial organization textbooks still discuss horizontal cooperation and competition almost exclusively in terms of standard cartel theory. (On the other hand, vertical cooperation and contracting is viewed differently; some! textbooks provide treatments of supplier-buyer relationships in which cooperation is viewed as enhancing efficiency.) Both in the textbooks and in policy discussion among economists, cooperation among competitors is highly suspect, being perhaps the last bastion of what was once referred to as the "inhospitality tradition" in antitrust. As a result, very little literature addresses how cooperation among competitors may sometimes be essential if innovating firms are to compete in today's increasingly global markets (Imai and Baba, 1989). Such cooperation is already important in Japan and in Europe. 1
This paper begins by describing the nature of the innovation process. We then explore socially beneficial forms of cooperation that can assist the development and commercialization of new technology, and suggest modifications to current U.S. antitrust law that would remove unnecessary impediments to organizational arrangements that support innovation and stimulate competition in the United States. The modifications we propose would create "safe harbors" for various forms of cooperative activities among competitors in unconcentrated markets and would permit cooperation in more concentrated markets if commercialization and appropriability were thereby facilitated. These modifications would bring U.S. antitrust laws closer to what is already in place in Europe and Japan and would promote competition more assuredly than would existing law.'