Propositions for R&D Governance Regimes: A Behavioral Perspective

Purpose: Our paper intends to bring systematic attention to the transaction costs and corresponding governance structures in the corporate R&D contexts. Design/methodology/approach: The current conversation on the governance of R&D has addressed topics related to investments, resource allocation, knowledge sharing, or managing intellectual property rights. While these are important aspects of innovation cost and benefit, they do not address an equally important issue of transaction cost arising out of human behavior. We adopt a systematic synthesis of 16 qualitative teaching case studies to validate the existence of human behavior-related transaction cost issues in the context of R&D and identify firms’ governance responses to mitigate or eliminate their effect. Findings: Our findings suggest that transaction costs issues can be mitigated by appropriate governance models ranging from centralized R&D to open innovation. While structure mitigates the transaction cost some ex-ante and ex-post controls may also be required. Practical implications: For management practice, the insights of our study provide evidence-based advice for R&D managers regarding the practical, effective ways of limiting and controlling the transaction costs associated with R&D activity. Originality/value: This paper uses teaching-case studies to analyze a variety of transaction cost dilemmas in the R&D context and brings in a new perspective to R&D governance.