Managing cooperation control problems in inter-organisational research and development exchanges
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Most scholarly knowledge about the management control of research and development (R&D) is premised on a vertical integration model of R&D management; however, in practice, R&D is increasingly being externally contracted through inter-organisational arrangements. Within this context, the aim of this thesis is to examine how cooperation control problems, which arise in inter-organisational R&D exchanges, are addressed by alternative hybrid structures and embedded management control systems (MCS)? To explore this question I investigate two inter-organisational R&D arrangements – a flexible subcontracting arrangement and a limited life equity alliance – within the Australian cotton industry. First, I use theory from transaction cost economics (TCE) to demonstrate the relevance of cooperation control problems in inter-organisational R&D exchanges. Furthermore, by decomposing the cooperation category I show how the risk of different forms of opportunism gives rise to three types of cooperation control problems at successive contractual phases. These are: costly (ex ante) negotiation of mutually agreeable projects contracts; suboptimal investment decisions based on misrepresented information (at the point of contract); and the difficulty in monitoring and enforcing (ex post) contract compliance. Second, I explain how cooperation control problems are addressed by inter-dependent combinations of hybrid structure and embedded MCS. This demonstrates that hybrid governance is not simply the generic inter-organisational context where control occurs; instead, alternative hybrid structures – characterised by varying degrees of formalisation, centralisation and relational governance – have different ‘control solving capacities’. In addition, each hybrid structure’s unique control capacity influences the design and operation of embedded MCS. This is because some MCS – particularly more structure-wide mechanisms – are used to complement the strengths of each hybrid structure; whereas other MCS – typically project-level mechanisms – are used to compensate for deficiencies of each hybrid structure in relation to certain control problems or transactions. Finally, I explore how control problems and control solutions relate. Based on my empirical results, I propose that each successive control solution choice is determined by a ‘residual control problem potential’, which is shaped by the adequacy of previous control solution choices. In addition, I predict when the relation between control problems and solutions will not hold. I propose that managers will trade-off transaction-level misalignment to avoid portfolio-level negative effects in terms of cost efficiency, internal congruence and perceived equity.
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