Formalization, communication quality, and opportunistic behavior in R&D alliances between competitors

For technology ventures (and also other firms), R&D alliances provide great learning opportunities and access to scarce resources. However, R&D alliances, in particular between competitors, also involve the concomitant threat of opportunistic behavior, which many firms attempt to manage by formalizing the partnership. Yet, prior research provided mixed findings suggesting that formalization alleviates opportunism, fails to do so, or, ironically, even promotes it. The questions of whether and, if so, when formalization can deter opportunism remains topical. This study differentiates two forms of opportunistic behavior, strategic manipulation and knowledge appropriation, and examines how they are affected by formalization per se and in combination with communication quality. Findings from 82 R&D alliances between competitors indicate that extensive formalization promotes opportunistic behavior. In contrast, communication quality mitigates the dysfunctional effect on strategic manipulation and also alleviates both forms of opportunism directly. Most effects vary with the type of opportunistic behavior. Our findings add to the literature by demonstrating a positive formalization–opportunism relationship in the context of R&D alliances and by suggesting that relational governance (communication quality) compensates for the dysfunctional effects of formal governance (formalization), rather than both having complementary relationships. The results also support the call for more research into nuances of opportunism: they show that differentiating forms of opportunism matters for understanding the efficacy of safeguards against opportunism. Managers are warned against over-formalizing alliances, which spurs opportunism. Instead, they should cultivate an atmosphere of open communication while they can still maintain some “healthy distrust.” This attenuates the adverse effects of formalization, which is important since a certain level of formalization is often inevitable in R&D alliances

Governance and Competence

Transaction cost economics faces serious problems concerning the way it deals, or fails to deal, with bounded rationality, the efficiency of outcomes, trust, innovation, learning and the nature of knowledge. The competence view yields an alternative perspective on the purpose and boundaries of the firm. However, the competence view cannot ignore issues of governance, and in spite of serious criticism, transaction cost economics yields useful concepts to deal with it. This article aims to contribute to the development of theory and empirical research that connects governance and competence perspectives.governance;learning;organization;inter-organizational relations;inter-firm alliances

What drives contract design in strategic alliances? Taking stock and how to proceed

We collect and assess prior empirical evidence on contract design in alliances that has been published since Parkhe’s (1993) seminal study on inter-firm contracts. We elaborate on the effects of transaction-related factors, experience gained from prior relationships, and deliberate learning efforts on contracts. Our paper offers three contributions. First, we systematically review the existing literature on alliance contracts and summarize our findings. Second, while prior research has traditionally focused on contractual complexity, we place the content of contracts center stage and identify three contractual functions. While existing studies on contractual functions predominantly refer to safeguarding as a response to appropriation concerns, we also consider coordination and contingency adaptability as outcomes of adaptation concerns. Third, we disentangle the differential influences of previous experiences on distinct contractual functions and show that experience gained from prior relationships has different effects on safeguarding and contingency adaptability than on coordination. Overall, we add to the systematization of the current debate on alliance contract design and trace promising avenues for future research on the impact of transaction- and experience-related factors on the complexity and content of alliance contracts