Governance of R&D alliances from a transaction cost based view

Abstract

Since the liberalization of the electric power industry in 1996, several research and development (R&D) alliances have been formed. These alliances have been formed in order to minimize the costs of new developments and to come up with more innovations. The purpose of this study is to investigate whether the misalignment of governance structure of R&D alliances influences the success of the alliance. It is hypothesized that a successful alliance minimizes the hazard of opportunism without imposing excessive bureaucracy in order to profit maximally from the cooperation. Transaction cost economics (TCE) argues that aligning the governance structure in a transaction leads to more efficient outcomes. Two types of misalignment are researched: Excessive bureaucracy hazards, and risk of opportunism. The case that is researched are the R&D collaborations on photovoltaic (PV) cells, which are currently being developed in the electric power industry in the Netherlands. It is found that misaligned governance dampens innovative performance. More specific, if transactions have an aligned governance structure then there is an overall better innovative performance of 56% compared to alliances which have a misaligned governance structure. The influence of risk of opportunism is somewhat bigger than the influence of risk of excessive bureaucracy. Transactions that suffer from the hazard of opportunism have 33,5% less innovative performance, and transactions that suffer the risk of excessive bureaucracy have 27% less innovative performance, compared to transactions that are aligned. The results provide empirical evidence for the hypothesis stated in TCE.