Exploring Management Control Mechanisms in Inter-organizational Relationships

The Ph.D. research area revolves around Management Control Mechanisms (MCMs) in Inter-Organizational Relationships (IORs) with a focus on R&D project alliances. A systematic literature review is performed to address the need for a comprehensive overview of the broad yet fragmented body of literature on management control mechanisms (MCMs) in inter-organizational relationships (IORs). Based on the results of the review, management control has given emphasis to MCMs that promote learning, creativity and relational quality (Ariño et al., 2001; Kim et al., 2010) and less on strict formal MCMs, stimulating the debate on the complementary and substitutive relationship of different types of MCMs. The extant literature offers scant investigation on how MCMs work especially in managing tensions that occur because of the heterogeneous and dynamic settings in IORs. Moreover, the evolution of MCMs over the life of the IORs has not been adequately explored. The results of the review of literature open to many new opportunities for future research to explore. The empirical part of the research is dedicated to bridging some of the most relevant gaps specifically those which are briefly described above. This research focuses on the use of different types of MCMs in innovation-driven IORs, particularly along the development process of R&D project alliances. R&D project alliances are “temporary coordinated and project-based activities between legally autonomous firms that invest capacities of their personnel and other resources in the jointly formed projects” (Bouncken, 2011, p. 588). The fact that alliance members come from different backgrounds, with different views, assumptions, objectives and knowledge specializations can both be an advantage for developing radical innovations and a complex managerial challenge (Grant and Baden-fuller, 2004; Simonin, 1999, 2004). Investigating the knowledge sharing activities in R&D project alliances warrants the understanding of heterogeneity, the concept of an epistemic community, and the development process of the project alliances to be able to take a temporal perspective. The study offered answers to the following research questions: RQ.1: “Which type of tensions can emerge in the development process of R&D project alliances”; RQ.2: “How are MCMs used to manage the tensions that are present in the development process of R&D project alliances?” The methodology follows a qualitative multiple case study that relies on interviews with different project stakeholders representing the different partner organizations involved in the R&D project alliance. The Straussian Grounded Theory (GT) approach is performed as the data analysis technique choosing a coding paradigm that linked the causes, actions, conditions, and consequences to better explain the observed phenomena. In this way, how the traces of evidence lead to the main findings is better explained. The comparison of the data using the within-case and cross-case analyses allows for the replication of results, which increased the reliability of findings. The results of the study identified three types of tensions managed using MCMs in the development process of R&D project alliances, namely tension among partners’ goals, the tension between the project organizational levels, and tensions among scientific epistemic communities. The interplay between formal and informal MCMs in managing the tensions are investigated in two periods, beginning from the project definition phase to the project execution phase. In most cases, formal MCMs are established earlier than informal MCMs. Establishing formal MCMs upfront slows down project start but intends to offer quick solutions to manage tensions when the project is running. The findings support the complementary view on the relationship between formal and informal MCMs. Findings raise the conclusion that formal mechanisms create the necessary conditions for informal mechanisms to work effectively in managing tensions in R&D project alliances. As an example, open communication as an informal mechanism becomes fairly easy when the partners know that a well-defined IP agreement or formal contract protects the knowledge that they are sharing – without it, open communication does not even take place. Answers to the two research questions provide important managerial and academic implications. The findings bridge relevant research gaps on the opposing view between the complementary and substitutive relationship of different types of MCMs which are now better explained by taking a temporal perspective that not many studies have been able to fulfill in the past. Lessons teach practitioners to gain a better appreciation of establishing formal MCMs in the beginning even if it delays the execution of the project. Formal MCMs should not only be perceived as mandatory steps to comply with funding requirements, nor should they be seen as restrictions that limit and slow down creativity. The boundaries set by the formal MCMs are not intended to restrict, but rather to allow flexibility and self-organization within its bounds. Evidences related to formal MCMs in the form of structure and functions suggests the importance of choosing to organize the projects following a hub-driven structure and the importance of choosing the right project manager. These mechanisms provide the minimum assurance that tensions can be managed and resolved in case tensions lead to instability.