The Cost of Misaligned Governance in R&D Alliances

Posted: 7 Feb 2004

See all articles by Rachelle C. Sampson

Rachelle C. Sampson

University of Maryland - Robert H. Smith School of Business; Georgetown University - Robert Emmett McDonough School of Business

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Abstract

Transaction cost economics argues that aligning transactions with governance structures leads to more efficient outcomes. While empirical evidence demonstrates that firms choose governance consistent with transaction cost predictions, the performance implications of governance choices are less well explored. Here I examine the cost of misaligned governance in the context of research and development (R&D) alliances. Two costs of misalignment are evaluated: excessive contracting hazards and excessive bureaucracy. Using a sample of R&D alliances in the telecom equipment industry, I find that alliance governance selected according to transaction cost arguments improves collaborative benefits substantially over governance not so selected. Interestingly, governance misalignments imposing excessive bureaucracy reduce collaborative benefits more than misalignments imposing excessive contracting hazards. These results provide empirical evidence of the cost of misaligned governance and have implications for research on the limits of internal organization and links between organizational form and innovation.

Keywords: Governance, alliances, R&D, patents, joint ventures

JEL Classification: L22, O31, O32

Suggested Citation

Sampson, Rachelle C., The Cost of Misaligned Governance in R&D Alliances. The Journal of Law, Economics, and Organization, Vol. 20, No. 2, pp. 484-526, 2004, Available at SSRN: https://ssrn.com/abstract=496203

Rachelle C. Sampson (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

Van Munching Hall
University of Maryland
College Park, MD 20742-1815
United States
(301) 405-7658 (Phone)

HOME PAGE: http://www.linkedin.com/in/rachelle-sampson-68a3b610/

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

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