RESEARCH AND DEVELOPMENT
CONSORTIA



Research and development (R&D) consortia are formed by manufacturing companies, often with the support of government, for the purpose of conducting shared research on new technologies for the benefit of the consortium's member companies. Government-supported R&D consortia (kumaia) have been common in Japan since the 1960s, and now number more than 200. In the United States, however, the formation of industry specific R&D consortia was hindered by antitrust laws that penalized cooperation among competitors until Congress passed the National Cooperative Research Act of 1984 (NCRA). In 1993 the NCRA was amended to include cooperative production and redesignated the National Cooperative Research and Production Act of 1993 (NCRPA). These legislative acts reflected a new technology policy aimed at reducing governmental obstacles to the commercialization of new technology.

Under the NCRPA, firms within an industry may form consortia to conduct "precompetitive" research. Precompetitive research is research that is considered generic to the development of multiple products of basic value to all participants. By forming R&D consortia, manufacturing firms can avoid duplicating basic research tasks and share the results more cost effectively. As a result they are able to compete more effectively in the global marketplace.

Research and development consortia are required by the NCRPA to register with the U.S. Department of Justice, which recorded more than 600 new consortia from 1985 to 1996. While the NCRPA does not provide exemption from antitrust laws, it limits the damages that may be assessed if an antitrust violation occurs. Where antitrust laws provide for triple damages to be assessed, the NCRPA limits liability to single damages. In addition, any alleged antitrust violations would be judged under a rule of reason standard, rather than assuming they were illegal per se. In the years since NCRPA was passed, however, no antitrust proceedings have been brought against registered consortia.

Research and development consortia can provide member companies with many benefits. They are formed to share expenses and resources and to pool talent and expertise. Consortia that are formed in the United States to compete globally are eligible for government funding. The most common type of consortia are horizontal, consisting of competing firms within an industry. Vertical consortia include firms ranging from materials suppliers to finished product manufacturers.

Companies form research and development consortia for different reasons. Among the reasons cited are market pressures, international competition, the increased pace of new product development, cutbacks in corporate research and development budgets, and shared concerns about meeting new regulatory or safety requirements. According to a survey conducted in 1993 by the Economist magazine, the three reasons most commonly cited were to gain access to a market, to exploit complimentary technologies, and to reduce the time taken for innovation.

Following the passage of the NCRA, research and development consortia were most frequently formed in the electronics, semiconductor, and pharmaceutical industries. In the chemical industry, companies more frequently entered into dual-company alliances rather than multicompany consortia.

Research and development consortia have been successful in spurring innovation. SEMATECH, a Texas-based consortia of major semiconductor manufacturers founded in 1987, has had dramatic success in helping its member companies regain dominant market shares in the international semiconductor equipment and silicon-chip markets. Another consortia, the U.S. Council for Automotive Research (USCAR), was formed to accelerate technological innovation among the major automobile manufacturers.

After manufacturing companies have agreed to form a consortium and have registered with the U.S. Department of Justice, they then assign personnel and budget funds to it. Joint research is usually conducted at a single specified site. Under the NCRPA, the research must be precompetitive, concerning areas generic to the products of each member company. As the consortium develops new technologies and improves on existing ones, individual companies may begin to apply those technologies to their own products. At a certain point, the companies may agree to dissolve the consortium to focus on their own applications.

Research and development consortia may consist exclusively of companies from a single nation, or they may be international in scope. Japan's Ministry of International Trade and Industry (MITI), which supports and directs R&D consortia in Japan, began opening some of its R&D consortia to foreign companies in 1990. In the European Union, U.S. companies are allowed to participate in publicly supported R&D consortia. In the United States, consortia that receive government funds are limited to domestic companies.

In the United States, joint ventures between private industry and federal laboratories offer similar research sharing and development opportunities as R&D consortia. Called Cooperative Research and Development Agreements (CRADAs), they are becoming more commonplace as federal laboratories refocus their efforts away from Cold War defense projects to help domestic industries develop new technologies.

[ David P. Bianco ]

FURTHER READING:

Corey, E. Raymond. Technology Fountainheads: The Management Challenge of R&D Consortia. Boston: Harvard Business School Press, 1997.

Hemphill, Thomas A. 'U.S. Technology Policy, Intraindustry Joint Ventures, and the National Cooperative Research and Production Act of 1993." Business Economics, October 1997, 48-54.

"Holding Hands." Economist, 27 March 1993, 14 16.

Jorde, Thomas M., and David J. Teece, eds. Antitrust, Innovation, and Competitiveness. New York: Oxford University Press, 1992.

Vandendorpe, Laura. "Capitalizing on Consortia: Cooperation Bolsters Research." Research and Development, October 1997.



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