Choosing governance modes for external technology sourcing
Van de Vrande, Vareska J.A. Lemmens, Charmianne E.A.V. Vanhaverbeke, Wim
Van de Vrande, Vareska J.A.
Lemmens, Charmianne E.A.V.
Vanhaverbeke, Wim
Citations
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Publication Type
Journal article
Editor
Supervisor
Publication Year
2006
Journal
R & D Management
Book
Publication Volume
36
Publication Issue
3
Publication Begin page
346
Publication End page
363
Publication NUmber of pages
Collections
Abstract
This study examines the effect of uncertainty on governance mode choice of interfirm relationships in new business development (NBD). We combine transaction cost economics and real options reasoning, arguing that in the early stages of NBD, where technological and market uncertainty are very high, companies are better off using governance modes that are reversible and involve a low level of commitment. When uncertainty has decreased as a result of prior R&D investments, transaction costs considerations become dominant and companies will shift towards governance modes that are less reversible and more hierarchical. We argue that technological distance leads to less hierarchical governance modes and prior cooperation between firms leads to subsequent choices for more hierarchical modes. Finally, we propose that higher exogenous uncertainty leads to less hierarchical governance modes.