Pre-emptive patenting, joint ventures, and the persistence of oligopoly

Abstract

Gilbert and Newbery (1982) have examined pre-emptive patenting and the persistence of monopoly. The present paper considers pre-emptive patenting when there are several incumbent firms, rather than just one. It is shown why the incumbent oligopolists, behaving non-cooperatively, might fail to deter entry. This suggests that a joint venture in R and D might be a useful entry-deterring device insofar as it pools the incumbents' incentives to prevent entry. This is indeed the case for 'small' innovations, but for 'large' innovations the formation of a joint venture weakens the incumbents' incentive to innovate by removing the competitive stimulus between them.