Governing Explorative R&D Alliances: Searching for Effective Strategies

Abstract

Although firms increasingly rely on interfirm collaboration to explore new technological opportunities, few studies have examined the ways in which this collaboration form is governed. In this paper, we attempt to increase our understanding of governing explorative RD Katz/Allen 1985; Wheelwright/Clark 1992). Exploring new technologies internally is a time-consuming and an expensive process that is fraught with uncertainty (March 1991). Firms therefore tend to sign contractual agreements with external partners to explore new technological opportunities (Koza/Lewin 1998; Rothaermel/Deeds 2004). Such explorative RD Rothaermel/Deeds 2004). While most studies point to the potential advantages of interfirm collaboration for explorative purposes, they do not address the question of how this particular form of interfirm collaboration can be governed (Gerwin 2004). This theoretical paper therefore aims to contribute to our understanding of the governance process of explorative R&D alliances. In this paper, we first define the concept of explorative R&D alliances and point to conditions that facilitate exploration. We then argue that explorative R&D alliances face substantial risks of opportunistic behavior and coordination costs. Next, we assess the effectiveness of formal governance mechanisms in the specific setting of explorative R&D alliances. Based on insights from the alliance literature, we identify formal governance mechanisms as effective tools to mitigate the risk of opportunistic behavior as well as coordination costs. At the same time, applying insights stemming from the new product development literature, we point to the limitations of formal governance mechanisms for the exploration of new technological opportunities. Finally, we propose two alternative governance strategies that seem to be capable of addressing the problems of opportunistic behavior and coordination costs without hampering the exploration of new technological opportunities. These two alternatives imply 1) relying on embedded relationships in which heterogeneity is maintained and 2) balancing formal and relational governance. Explorative R&D alliances: Definition and conditions As the focus of this paper is on explorative R&D alliances, we first define this concept in detail. Subsequently, we identify facilitating conditions to come to successful exploration, providing the framework in which effective governance strategies for explorative R&D alliances can be identified. Defining explorative R&D alliances Applying the exploration-exploitation dichotomy of March (1991), researchers within the alliance literature (e. …