Transnational Joint Ventures Between UK and EU Manufacturing Companies and the Structure of Competition
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*Dr.Andrew Millington is a Lecturerin Business Economics at the Universityof Bath. His principalresearchinterestis in the field of Europeanbusiness and he has published frequently in this field, including a research monograph and a report for the EU Commission. *BrianBayliss is Professorof Business Economics at the Universityof Bath. His principal area of researchis in Europeanbusiness and logistics. He has recently chaired the committee of enquiryfor the EU on roadfreight transportin the single Europeanmarket and completed a major project, published by the Instituteof CharteredAccountants in EnglandandWales (ICAEW),on strategicinvestmentdecisions. Thesupportof theEconomicandSocialResearchCouncilis gratefullyacknowledged. Theworkwasfundedby ESRCawardnumber:F00232008. Theauthorswouldalso like to thankthreeanonymousrefereesfortheir helpfulcommentsandsuggestions. Received:June1993;Revised:July&November1994;Accepted:November1994. 239
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JOURNALOF INTERNATIONALBUSINESSSTUDIES,SECONDQUARTER1995
to facilitatethis process, the EC Commission has encouragedcooperativeagreements and JVs, through the mechanism of the Single European Act [EC Commission 1985] and a rangeof specific policy initiatives.3The supportof the EU Commission for these operationsreflects the scope for efficiency gains as firms combine resources and benefit from technological complementarities, economies of scale (see, for example, Mytelka and Delapierre[1987]; Peterson [1991]) andrationalisationin matureindustries Such efficiency gains must, however, be balanced against the potentially anticompetitive effects of JVs within the domestic marketsof the Member States [Jacquemin1988;EC Commission 1991]. In essence, the anti-competitiveeffects are the same as those createdby merger.They includethe restrictionof competition among horizontally related firms, marketforeclosure and the reductionin potentialcompetition.Any reductionin competitionmay occur either by design or as a by-productof the collaboration.In the first case, companiesmay pursue alliancestrategiesin orderto controlcompetitivecontingenciesbetweencompanies in those previouslyclosed nationalmarketswhich arenow increasinglysubjectto EU competition.The EuropeanCommission itself has commentedthat such JVs may act as a 'mere fa9ade for anti-competitive agreements' [EC Commission 1976, p.5].4In the second case, collaborationmay encouragea generalclimateof mutual non-competition between the parent companies, as well as ending any possible competitionin relationto the JV product. Although the formationof these JVs has importantimplicationsfor the structure of competitionin EU markets,and hence for the implementationof competition policy within the EU, therehas been no attemptto investigatesystematicallythe relationshipbetween the incidence of transnationalJVs in the EU and the structureof competition. EU transnationalJVs form the basis of an ext
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