Rationale for Collaboration of Rival Firms Essay

Rationale for Collaboration of Rival Firms - Essay Example For him there is no tension between competition policy that allows collaboration and intellectual property rights and antitrust laws. On the contrary, the competition policy based on pure economic reasoning will at the same time promote innovation of new ideas and new ways of doing things and the firms that facilitate these innovations will reap a great benefit in the process. This type of competition policy also seek to promote co-operation between firms so as to pull funds and ideas together to accelerate economic development which otherwise could have been dragged due to barriers to innovation and the perception of sole ownership of innovative ideas (Teece, 1986, p.297). As widely taken, competition policy affects the very fabrics of competition and business behaviour. The U.S economy impressive performance is linked to the competition that promoted innovations through antitrust policies such as patent rights, intellectual property right, and copyright just to mention a few. The assurance that whatever one invent have a right to enjoy the fruits of it for a given duration of time have been the motivation drive towards more innovation and large investment in R&D. Although the competition policy is seen as in conflict with patents and copy right laws, both works to stimulate innovation and subsequent commercialisation of technologies. Competition policy requires a firm to deal with its competitor through 'essential facilities' doctrine and 'reasonable royalty'. This invites the negotiations that may lead to mergers, license or even joint ventures and alliances. These are rationale of collaboration by rival firms thus improving global economy in the long run (Buckley and Casson, 1988, p.48). Competition policy can be used... The researcher states that competitive markets are widely viewed as major drivers in fostering innovation. Competition regimes are conducive environment for innovation as companies learn from each other various techniques and strategies to improve their service delivery and products from their rivals in order to survive in the market. Nevertheless, global partners impact in bring a change in market structure might be a great impetus to economic growth and the rate of innovation to the countries involved in a global arena in general. The countries therefore are advised to make reasonable and strategic competition policies that allow for a certain degree of collaboration and partnering with rival firms. From the analysis, that was presented in the essay, it is clear that global competition attracts some kind of partnership from the rival firms. Firms’ collaboration promotes innovation as well as creativity and thus propelling global economic growth. The rationality behind collab oration of rival firms is to undertake such projects that require a huge capital and technical investments a single firm cannot be able to sustain. The cooperation is in such a way that each firms will at the end reap some benefits through a well regulated antitrust policy. We have also seen that not all cooperation is meant for the greater good of the society. In conclusion, the researcher states that rival firms collaboration promotes global competition while at the same time it can be anti-competition.