We study the decision of two firms within an oligopoly concerning whether to enter into a horizontal agreement to exploit complementarities between their R&D activities and, if so, whether to merge or form a research joint venture (RJV). In contrast to horizontal merger, there is a probability...

In reality, horizontal mergers are often driven by the opportunities they create for the exploitation of R&D complementarities. An example is the BP/ ARCO mega-merger, approved in 2000, where a central justification was that integration - by committing the firms to sharing their accumulated...