J PROD INNOV MANAG 2009;26:58–70

r 2009 Product Development & Management Association

Cooperative Innovation Projects: Capabilities and Governance

Mechanisms

Petra M. Bosch-Sijtsema and Theo J. B. M. Postma

This paper is concerned with how firms in a project-based industry cooperate in

technological innovation projects in the construction industry. The main focus of the
paper is on the sharing of capabilities in cooperative innovation projects and how
these cooperations are governed. A knowledge-based perspective is applied, and four
cooperative innovation projects in the construction industry are compared. Based on
the case studies, a set of propositions is defined. First, a cooperation aimed at a
mutual strategic benefit in mutually gaining access to the knowledge bases of the
involved firms, while maintaining their own differentiated knowledge base, can re-
sult in more stable and long term relationships with mutual trust between the co-
operating firms. Second, in a cooperation aimed at a mutual strategic benefit in
mutually gaining access to the knowledge bases of the involved firms, partners not
only gain access to each other’s technological capabilities but also develop and share
knowledge about organizational aspects and market situations and gain knowledge
about the way of working of the partner firm. Third, in a cooperation aimed at
mutual strategic benefit in mutually gaining access to the knowledge bases of the
involved firms, noncodifiability of the capabilities is conditional to create a win–win
situation. And fourth, cooperation aimed at a mutual strategic benefit in mutually
gaining access to the knowledge bases of the involved firms is based on mutual
competence and intentional trust as its main governance mechanism, whereas con-
tracting between market parties aimed at knowledge–output transactions is repre-
sented by limited trust and arms’ length (contractual) relationships as its main
governance mechanism.

Introduction cooperation with other firms in technological innova-

tion projects. A PBF creates and recreates new orga-

T
he concern in this paper is how project-based nizational structures around the demands of each
firms (PBFs) deal with strategic issues with project or each major customer. However, it lacks
respect to sharing capabilities and the kind the strengths of more traditional functional forms in
of governance mechanisms PBFs apply for to gain performing routine tasks, achieving economies of
scale, and coordinating cross-project resources
(Hobday, 2000). Examples of project-based industries
Address correspondence to: Petra M. Bosch-Sijtsema, Helsinki
University of Technology, Faculty of Industrial Engineering and Man- are the engineering and construction industries
agement, Laboratory of Work Psychology and Leadership, Otanie- (Blindenbach-Driessen and Van Den Ende, 2006;
mentie 14, 02015 TKK Espoo, Finland. Tel.: þ 358-50-9295890.
E-mail: [email protected]. Keegan and Turner, 2002). Within PBFs, we may dis-
 We would like to thank the editor Anthony Di Benedetto and two
tinguish between two types of projects. Business pro-
anonymous reviewers for their constructive comments and support on
two earlier versions of the paper. Their comments contributed to con-
jects are projects executed by order of a specific client
siderable improvements. (Blindenbach-Driessen and Van Den Ende, 2006),
COOPERATIVE INNOVATION PROJECTS J PROD INNOV MANAG 59
2009;26:58–70

whereas development (innovation) projects aim at in- 2004), and learning between alliance firms (Child,
novation and take place separately from business pro- Faulkner, and Tallman, 2005) is discussed for long-
jects. Few studies investigate innovation projects term cooperative structures. Few studies, however,
performed in cooperation with other firms in pro- discuss learning and knowledge transfer in develop-
ject-based industries (cf. Gann and Salter, 2000). Co- ment (innovation) projects in the context of PBFs,
operation can be organized in several different forms which can have different lengths of duration. This
(e.g., subcontracting, consortia, a strategic alliance, kind of cooperative projects will therefore be specifi-
joint venture, innovation network) (Tidd, Bessant, cally the focus of this study.
and Pavitt, 2002). A main question concerning these The construction industry is an example of a pro-
multipartner projects is how to develop new knowl- ject-based industry (PBI), in which project manage-
edge or how to transfer it without running the risk of ment and control are important instruments (Bresnen
one-sided advantages by one of the partners involved. and Marshall, 2000; Naoum, 2003; Prencipe and Tell,
The aim of this paper is to study in cooperative in- 2001; Pries and Janszen, 1995). The construction in-
novation projects the knowledge capabilities and the dustry requires a unique combination of labor and
employed governance mechanisms to deal with the materials inputs, performed and coordinated on site
aforementioned risk to arrive at a set of propositions. (Eccles, 1981, p. 137), and is based on a stable rela-
Several authors have argued for the pursuit of coop- tionship between a general contractor and special
erative strategies as a means for creating knowledge trade subcontractors. The contracting mode of the
or gaining access to knowledge and skills outside construction industry is defined as a quasifirm (ibid.),
the boundaries of the firm (Hamel, 1991; Inkpen which is typically located in between markets and hi-
and Crossan, 1995; Kogut, 1988; Lane and Lubatkin, erarchies (Hennart, 1993; Williamson, 1975). Innova-
1998; Larsson et al., 1998; Wathne, Roos, and von tion performance of the construction industry in
Krogh, 1996). This literature refers to the relevance of terms of productivity, quality, and product function-
organizational and interorganizational learning and ality has been relatively low in comparison with other
the knowledge-based view in this context. Although industries (Winch, 1998). The low level of innovation
innovation can be stimulated by cooperation, several performance is based on a number of aspects: (1) the
studies mention that learning and development of fragmented nature of the industry; (2) the uniqueness
knowledge can be problematic because of, among of the construction as a product; (3) the division be-
other reasons, organizational and cultural differences tween design and construction; and (4) the role of
and a competition to learn and the fear of firms to consultants and the procurement methods for receiv-
disclose knowledge (e.g., Hamel, 1991). Cooperation ing assignments (Naoum, 2003). The construction in-
between firms has been researched extensively in the dustry consists of a large number of (specialized)
alliance and joint venture literature in which gover- small and medium-sized firms. It becomes difficult
nance between cooperating firms (Gerwin and Ferris, to permeate information and knowledge about prod-
uct innovations to all these firms. Forms of collabo-
BIOGRAPHICAL SKETCHES
rations (especially partnering, which is a longer-term
Dr. Petra M. Bosch-Sijtsema is researcher at Helsinki University of
alliance between contractors and clients in the con-
Technology on the Faculty of Industrial Engineering and Manage- struction industry) in the construction industry have
ment in the Laboratory of Work Psychology and Leadership in been seen as ways of dealing with the fragmentation
Finland and visiting scholar at Stanford University in California.
She received her licentiate from Lund University in Sweden and her
and lack of integration that have influenced attempts
Ph.D. from the University of Groningen in The Netherlands in to improve project performance over the years (Bres-
management and organization. Her research focuses on innovation, nen and Marshall, 2000). Bresnen and Marshall
knowledge creation, and transfer in project-based environments and
(2000) reviewed literature on partnering and stated
virtual teams.
that this research shows that, for example, cost, time,
Dr. Theo J. B. M. Postma is associate professor of strategic man-
quality, buildability, and fitness for purpose can be
agement at the University of Groningen on the Faculty of Man-
agement and Organization in The Netherlands. He received his dramatically improved if participants adopt more col-
Ph.D. in business economics from the University of Groningen in laborative ways of working. However, partnering as
1989. His research interests involve strategy, scenario development, discussed in literature mainly focuses on business
and strategic learning in and between organizations. His current
research interests include also corporate governance, innovation,
projects in which clients and contractors cooperate;
and networks. partnering is hardly discussed for innovation projects
with several cooperating parties. The focus of the
60 J PROD INNOV MANAG P. M. BOSCH-SIJTSEMA AND T. J. B. M. POSTMA
2009;26:58–70

present study is on cooperative innovation projects as the strategically most important resource of the
in which suppliers, customers, research and develop- firm (Grant, 1996). Knowledge resources and capa-
ment (R&D) institutes, universities and contractors bilities are developed over time through the execution
cooperate. of projects. Research on alliances indicates that
The often applied project control systems around alliances and joint ventures provide firms access to
which the PBF operates serve to stifle innovation the skills and capabilities of their partners (Hamel,
(Keegan and Turner, 2002). A number of authors 1991; Inkpen and Crossan, 1995; Kogut, 1988). Most
(e.g., Seaden and Manseau, 2001; Winch, 1998) have research on knowledge sharing in alliances stresses
discussed that it is difficult to measure innovation in learning (acquiring knowledge) of alliance partners.
this industry based on traditional measurements like Grant and Baden-Fuller (2004), however, focused on
R&D activities and patents, since the construction knowledge application, in which firms gain access to
industry mainly focuses on organizational processes, the stock of knowledge of its partner firms to exploit
contracting arrangements, and assembly methods complementarities but with the intention to maintain
(Seaden and Manseau, 2001). Furthermore, in the their base of specialized knowledge.
measurements of innovation in the construction Partner firms often aim at extending their set of
sector, architectural and engineering firms are usually distinctive technological capabilities (Colombo,
not included (Winch, 2003), but they do, however, 2003). These capabilities can be cospecialized or com-
score relatively high on innovation (Waalkens, 2006). plementary skills for the project (Doz and Hamel,
This might lead to an underestimation of innovation 1998; Gerwin and Ferris, 2004). However, studies
potential in the construction industry. Therefore, in show that significant differences in a partner’s knowl-
this paper, a more in-depth qualitative approach is edge base usually impede learning (Simonin, 1999). A
adopted from the point of view of innovation projects. cooperative innovation project or an alliance can also
New ideas can either (1) be adopted by firms and im- focus on acquiring similar technical skills (Pisano and
plemented on projects (top down) or (2) result from Teece, 1988), in which each partner has the knowledge
problem solving on projects and be learned by firms necessary to perform the work alone. The reason for
(bottom up) (Brady and Davis, 2005; Slaughter, 1993; cooperation in this respect is to limit risks in devel-
Winch, 1998). Usually less attention is being paid to opment or to establish a new industry wide standard
specific projects designed to create a new idea or (Gerwin and Ferris, 2004). When firms have similar
product in cooperation with other firms and R&D capabilities, mutual learning will be easier, as firms
institutes and universities (i.e., innovation projects). are better able to absorb each other’s knowledge
In the construction sector it is a relatively new phe- (Colombo, 2003). However, too many overlapping
nomenon to join other organizations to develop new knowledge bases promote convergence of partner’s
knowledge that can be applied by the involved firms capabilities (Mowery, Oxley, and Silverman, 1996),
or even applied in the whole industry. This type of and the cooperation can cease to exist since there is no
cooperation can enhance innovative performance of real need for accessibility when capabilities overlap
the industry. (Grant and Baden-Fuller, 2004). Although alliance
The paper is structured as follows. First, the knowl- literature on knowledge mainly focuses on longer-
edge-based view, capabilities, and governance of term cooperation, the issue of gaining access to or
cooperative projects are discussed. Then the method- acquiring knowledge is also applicable for relatively
ology of the study is presented, which is followed by shorter-term cooperative innovative projects. Knowl-
descriptions of four case studies of cooperative inno- edge transfer is defined as the process through which
vation projects in the Dutch construction industry. one unit is affected by the experience of another
After this, the cases are compared and propositions (Argote and Ingram, 2000). Knowledge transfer can
are defined; the final section concludes. be perceived as explicit (codified) and tacit (deeply
rooted) knowledge (Nonaka and Takeuchi, 1995).
Few studies apply a knowledge-based view for in-
Capabilities and Governance vestigating cooperative innovation projects in project-
based industries. Due to the focus on project work
To investigate cooperative innovation projects in the (implying result orientation) in these industries, firms
construction industry, a knowledge-based perspective are inclined to mainly concentrate on project
is applied. In this perspective, knowledge is perceived management and control to increase efficiency and
COOPERATIVE INNOVATION PROJECTS J PROD INNOV MANAG 61
2009;26:58–70

decrease costs, and innovation is limited or inhibited Industry

in project-based firms (Gann and Salter, 2000; Keegan
Project based industry
and Turner, 2002; Prencipe and Tell, 2001). Construction firms
Cooperative
Suppliers Innovation Project:

Governance Mechanisms - Kind of capabilities

R&D/ Knowledge transfer - Governance
knowledge Institutes and creation mechanisms
According to Nooteboom (1999), governance in co-
(trust, contract)
operative relationships deals with controlling rela-
Customers
tional risk due to opportunism and dependency of
firms. Das and Teng (2001) characterized relational
Figure 1. Process View of a Cooperative Innovation Project in a
risk as the probability and consequences of not having Project-Based Industry
a satisfactory cooperation. Both informal means of
governance (e.g., trust and reputation) and formal in-
struments of control (e.g., detailed contracts and the construction industry in which construction firms,
procedures for monitoring) can be relevant for inno- suppliers, customers, research institutes, and univer-
vation and learning (Nooteboom, 2000). In market sities cooperate with the intent to develop a new
situations, participating firms negotiate more or less product or service. The following questions are inves-
detailed contracts to protect against opportunistic be- tigated more in-depth:
havior (Williamson, 1975). Following Mayer, Davis,
1. What kind of knowledge capabilities are acquired
and Schoorman (1995, p. 712), trust is defined as ‘‘the
or gained access to by the cooperating partners,
willingness to be vulnerable to the actions of another
and what are the consequences for the cooperation?
party based on the expectation that the other will
2. What kind of government mechanism is applied
perform a particular action important to the trustor,
within the cooperation?
irrespective of the ability to monitor or control that
other party.’’ The relevance of trust is that it econo-
mizes on the specification and monitoring of contracts Methodology
and that it stimulates cooperation (Nooteboom,
1999). Trust between cooperating firms means an or- In this paper a comparative case-study analysis
ganization having confidence in the reliability of other (Eisenhardt, 1989) of four cases of cooperative inno-
organizations, regarding a given set of outcomes or vation projects in the Dutch construction industry is
events. One trusts an organization with respect to cer- applied. The Dutch government has taken interest in
tain behavior (Sydow, 1998). Lewicki, Tomlinson, innovation of the Dutch construction industry, in
and Gillespie (2006) indicated that trust in this view which different partners like contractors, suppliers,
is regarded as a single superordinate factor, with cog- universities, and customers cooperate to develop a
nitive, affective, and behavioral intention subfactors. new product or service. Besides the interest regarding
Behavioral aspects of trust refer to the dynamics and Dutch government, access to this industry was avail-
reciprocity of trust. The present analysis is restricted able, and therefore the Dutch construction industry
to the well-known distinction between competence/ was chosen as this study’s field of investigation. Be-
cognitive and intentional/affective trust (Child et al., fore investigating the case studies, six semistructured
2005; Lewicki et al., 2006). Competence trust relies on interviews within the construction industry were held
trust in technical, cognitive, organizational, and com- to capture the current ideas and status of innovation
municative competencies, and intentional trust is in this industry. Four case studies of technological
based on intentions toward a relationship, mainly in innovation projects that were performed in coopera-
refraining from opportunism (e.g., goodwill, affect, tion with different firms (mainly contractors from the
and dedication; see, e.g., Klein-Woolthuis, Hillebrand, construction industry in cooperation with suppliers or
and Nooteboom, 2005; Nooteboom, 1999, 2002). researchers) were selected. The number of four cases is
Figure 1 presents the study’s conceptual model. related to Eisenhardt (1989), who stated that this
The focus of the research (Figure 1) is on investigating number of cases is minimally required for case
knowledge transfer processes and governance mecha- comparison. Furthermore, the availability and access
nisms employed in cooperative innovation projects in to cases of cooperative innovation projects in the Dutch
62 J PROD INNOV MANAG P. M. BOSCH-SIJTSEMA AND T. J. B. M. POSTMA
2009;26:58–70

construction industry is rather difficult, because rela- to observe and analyze the similarities and differences
tively few initiatives are known in which firms cooper- between the case studies.
ate for innovation. Also, access is limited since many
organizations are afraid of information disclosure. Cooperative Technological Innovation Projects
The cases involved a technological innovation in
either products or processes in the Dutch construction Case Alpha (Duration In-House Development
industry. The amount of semistructured in-depth in- 1–2 Years). Case Alpha started as an in-house devel-
terviews held was 35 (from one to three hours) with opment project of a medium-sized contractor firm to
involved parties of the four case studies (case Alpha, develop a method to pour underwater concrete. This
5 interviews; case Beta, 5 interviews; case Gamma, method improved the quality of this type of concrete
9 interviews; case Delta, 5 interviews; and 11 inter- in terms of hardness and smoothness. The concept
views concerning construction context and exploitation was developed in-house. To test the developed
of the investigated innovation projects). The number of method, the initiating firm cooperated with diving
interviews held per case differed due to the number of firms, concrete firms, and concrete pumping firms.
firms involved in the investigated innovation projects. These partners had conflicting objectives and a win–
Items taken into account during the interviews were as lose mentality. They cooperated on a short-term basis
follows: (1) characteristics of the innovation; (2) the and had price-based competition (see Hennart, 1993).
firms involved; and (3) governance mechanisms of the Furthermore, a number of tests were performed by
cooperation and knowledge flows (i.e., knowledge independent R&D institutes. The initiating firm (i.e.,
creation and transfer between firms cooperating in the contractor) received a patent for the method and
the innovation project). published several international papers about the
The interviews were taped and transcribed, and method in comparison with other existing methods.
validation was received through feedback and respon- The innovation project is now terminated.
dent validation. The qualitative data were coded and
labeled according to qualitative analysis methods Case Beta (Duration 1.5 Years). Case Beta is a
(Strauss and Corbin, 1997). For the codification, cooperative between the headquarters of a large con-
several stages were applied iteratively throughout sortium of several contractor firms (i.e., initiating
the research (Locke, 2001). Incidents were sorted firm) and a supplier of concrete. The project is con-
into categories for comparison, and this labeling pro- cerned with the development of new applications for
cess was to some extent influenced by the theoretical self-compacting concrete. This implies that the con-
framework on project organizations, innovation, and tent of the concrete differs from others, as well as
the knowledge-based view. After a comparison of la- the shuttering method for applying the concrete—
bels and data incidents, the labels were renamed and meaning that the concrete was self-compacting and
categorized into a number of groups: (1) aspects of the could be unshuttered securely (without any problems,
innovation project and the involved firms; (2) capa- which was normally the case) the next day. The pro-
bilities; and (3) governance mechanisms. Based on the ject was terminated after the product was tested in a
codification and categorization of individual cases, real-life situation phase due to a lack of time and
cross-case analysis (Eisenhardt, 1989) was performed financial means. The concrete supplier, however, con-
to find patterns and differences between the cases. In tinues exploring the possibilities to develop this appli-
the following sections the four case studies are dis- cation for concrete.
cussed separately.
Case Gamma (Duration Approximately 10 Years).
Gamma developed a floor concept (including methods
and products). The floor was designed in such a way
Innovation Projects in the Dutch Construction that installations (for water, electricity, telecommuni-
Industry cation, ventilation, heating, and a sewer system) could
be exchanged without reconstructing the whole build-
The four case studies are described briefly herein. Af- ing. This increased the flexibility of changing the in-
ter a short description the cases are compared with terior architecture of houses and the sustainability
respect to the main issues of learning or accessing of buildings (in this case, residential houses). In Case
knowledge capabilities and governance mechanisms Gamma, different partners cooperated in the project
COOPERATIVE INNOVATION PROJECTS J PROD INNOV MANAG 63
2009;26:58–70

in different development stages. The initiating firm under water and cleaning the underwater surface
was a consultant firm in the construction industry. and of concrete companies for creating the concrete
For the development of the concept, the initiating formulae and concrete pump companies for pouring
company worked together with universities and R&D the concrete in the right way to execute the innova-
institutes. For testing and developing prototypes, the tion. The partner firms all had expert knowledge
initiating firm cooperated with manufacturers and about pouring underwater concrete, although they
with contract research institutes. For the exploitation specialized in different areas. The contractor firm,
(i.e., market introduction) and production of the however, was dependent on the capabilities of the
floor, the consultancy firm collaborated with a num- other firms to construct the underwater concrete (it
ber of suppliers that were able to develop and con- was not their core competence). Over time the partner
struct (parts of) the floor principle. The product is still firms learned and internalized the procedure through
being improved. experience in real-life construction projects, and they
improved the method and the concrete formulae.
Case Delta (Duration Approximately 5 Years). The Once the patent of the contractor firm expired, the
partners in the innovation project were an architect other firms started to sell the product and method as a
firm and two largely independent organizations (a sell- full concept and took over the market. The partners
ing center and a knowledge center that initiated the cooperated on an ad hoc and competitive basis. The
development) working within a medium-sized holding partners eventually did not share knowledge openly
company in the construction industry. Case Delta de- with each other.
veloped a three-dimensional (3D) modeling and calcu-
lation product and process, which changes the way of Beta. In Case Beta, two firms cooperated in the
working in a building project. With this system’s help, innovation project. The concrete supplier delivered
the whole building process can be divided into small knowledge of concrete, experience, and test material
steps until all separate parts are negotiated between the from their laboratory about the type of concrete. The
different parties (e.g., architects, contractors, engi- contractor firm delivered the initial idea, the real-life
neers, installation companies), and then all parts are project, and experience in coordinating construction
visualized in a 3D picture. After a complete 3D draw- projects. The supplier reported laboratory tests, ex-
ing is agreed on, the building is then constructed. This periences about concrete, and test results of the real-
new process requires a close cooperation among all life project. The partners also shared knowledge about
construction parties. Currently, the partnership is im- the market of both the contractor firm and the con-
plementing the innovation with the subsidiaries of the crete firm. Furthermore, both parties discussed be-
holding company, and the architect firm is exploiting forehand their expectations, possible risks, and
parts of the technology on the market (they exploit 3D responsibilities of the project, and they evaluated the
modeling commercially to other clients). project (content) and the cooperation after testing the
product. The partners were open in sharing informa-
Capabilities in Cooperative Innovation Projects tion about the project, but little information outside
the project was discussed.
Based on the knowledge-based perspective, the capa-
bilities that were important for the cooperation are of Gamma. In developing the concept of the innova-
interest to this research. This section provides a dis- tion of Case Gamma, technological knowledge about
cussion of the knowledge development and transfer the raw material of the combination of concrete and
and questions if capabilities are acquired or accessed steel and installations and experience of different
by and from the cooperating partners as well as the firms was discussed; partners’ capabilities were in con-
consequences this has for the cooperation. struction material, construction market, and installa-
tion systems. The firms working on the concept were
Alpha. In the beginning the innovation was created motivated to develop a new concept and shared their
and developed by one contractor firm. This firm pub- knowledge openly with each other. The concept was
lished the developed knowledge in the form of patents developed and tested by suppliers and independent
and publications in construction magazines. The con- research institutes according to quality and safety reg-
tractor firm needed the capabilities of diving compa- ulations. These firms shared only the needed knowl-
nies for checking the process of pouring concrete edge for testing. The production of the floor was
64 J PROD INNOV MANAG P. M. BOSCH-SIJTSEMA AND T. J. B. M. POSTMA
2009;26:58–70

performed by a number of suppliers who developed were price driven and contained clear expecta-
longer-term relationships with the consultancy firm tions, risks, and responsibilities of all involved parties.
(for not only innovation projects but also business
projects). These suppliers were able to develop and
Beta. In Case Beta, the cooperation between the
produce parts of the floor product (knowledge on steel
supplier and the contractor firm was based on mutual
and concrete). Furthermore, the suppliers had contact
trust (competence and intentional-based trust). Both
with the final customers and knew the construction
partners supported the specific project financially, but
market. The relationship between the suppliers and
this has not been formalized in a written contract
the initiating firm developed into a mutual trust and
(only in minutes of a meeting). The relationship was
sounding board relationship. The involved partners
project specific (i.e., for this innovation project only);
were very open to new knowledge and were transpar-
however, the partners cooperated in business projects,
ent toward their partners. The firms with whom more
and the partners had professional relationships with
long-term relationships were built shared the perspec-
other organizations as well on these topics. The par-
tive of the initiating firm to change aspects in the
ties explicitly discussed the risks and problems that
construction market.
could occur.

Delta. In the early phase of the innovation project

Gamma. Case Gamma had different types of rela-
Delta, tasks were allocated between the parties, based
tionships in their cooperation. During the develop-
on the specific skills of the parties with respect to
ment of the concept, the partner relationships were
knowledge in drawing 3D construction models, cal-
based on personal relationships; they knew each other
culation knowledge, and knowledge about the con-
from previous experiences/affiliations and shared a
struction industry and innovation processes. The
mutual benefit for society, their own industry, or fu-
result of the project was a better understanding of
ture business. There was no contract, but the rela-
the activities and capabilities of each party. Knowl-
tionships were based on mutual (competence and
edge is exchanged about the process and how to ex-
intentional) trust. Some partners dropped out and re-
ecute the innovation. The parties had different
gretted the fact that there was no explicit formulation
perspectives, and they learned from each other’s
of expectations and results when the development
points of view and positions in the market. The part-
process toward commercialization seemed to take
ners created and internalized knowledge about the
too much time. When prototypes needed to be built
development of partnerships. This knowledge is not
and tested, more formal relationships were estab-
stored but orally shared. The organizations (not only
lished, based on standard supplier–customer contracts
the contact persons but also other members of the
in which both parties agreed to participate on certain
organizations) are now fully involved in the develop-
conditions. In the exploitation phase (production and
ment and commercialization of the product and
introduction to market) the relationships between the
knowledge about the system and methods has been
industrial partners and the leading firm were contract
internalized in the partner’s firms. The relationship
based on a supplier–customer contract. Over time the
between the firms was transparent and open to de-
relationship between the parties grew into a more (in-
velop new knowledge and to solve conflicts.
tentional) trust-based relationship, and they cooper-
ated on other activities as well. These other activities
Governance Mechanisms were not contractually sealed. The cooperating parties
had no previous affiliation with each other, but they
The focus of this paper is on two types of governance had in the initial phase a similar perspective about
between the firms participating in the innovation pro- testing new products and ideas. The relationship de-
jects: (1) contractual relationships; and (2) trust-based veloped into a (intentional) trust-based relationship
relationships (see Nooteboom, 2000). The four cases ap- because of good experiences in working together. The
plied different governance mechanisms in their projects. exploitation phase of the project consisted of long-
term relationships without a guaranteed workload in
Alpha. The relationships between the initiating firm both contract and trust-based forms. Most members
and its partners were mainly contract based (supplier were motivated by intrinsic values of improving the
–customer contracts) and short term. The contracts construction industry.
COOPERATIVE INNOVATION PROJECTS J PROD INNOV MANAG 65
2009;26:58–70

Delta. In Case Delta the partners consisted of two ties, but with the intention of maintaining its distinc-
firms in a holding firm in the construction industry tive base of specialized knowledge. The authors men-
and an architect firm. The holding had a strategic al- tion that when firms focus on acquiring (learning)
liance with the architect company, in which a number knowledge from each other the outcome may become
of principles have been described. The partnership a competition for learning (Hamel, 1991).
used the contract to create understanding about how Although literature about capabilities mostly dis-
to deal with several issues. Between the two holding cusses long-term relationships between firms, part of
companies no contract has been made, since both or- this literature can also be applied to shorter-term co-
ganizations have a common interest. All parties con- operations. The firms involved in Case Alpha gained
tributed to develop a formal agreement to register access to the knowledge base of the initiating firm,
what they wanted to achieve with this cooperation in and they exploited this knowledge while they also
one or two years. The relationship in the alliance has maintained their own distinctive specialized knowl-
been build gradually. Both firms have similar perspec- edge. However, the initiator of Case Alpha (i.e., the
tives about how the construction industry should contractor firm) did not have access to or learn from
work and are willing to be transparent, open, and the capabilities of its partner firms. The initiator firm
trustful both in terms of competence and intentional did not view the innovation as a core competence, and
trust. The partners have worked within the alliance no strategic intent was placed in gaining access to the
for some time now. However, they stated that they knowledge base of the other firms. The partner firms
had to solve some arguments and conflicts while de- learned, from the initiating firm, the important ele-
veloping the concepts and prototypes of the innova- ments of the innovation of underwater concrete and
tion project; the architect firm even reorganized its reproduced their own version of a method and prod-
organization to develop and execute the innovation. uct in this field. Over time the partner firms were able
Over time they grew closer together and learned to to execute the full process of constructing underwater
understand each other better. concrete. Through knowledge leakage the partner
firms acquired the knowledge from the initiating
firm and broadened their knowledge base, and a com-
Knowledge Capabilities and Governance petition for learning arose in which there was a win–
lose result. This finding is confirmed in Hamel (1991),
In this section the four cases on knowledge capa- who stated that partners with more similar capabili-
bilities and governance mechanisms used in the ties (in this case, capabilities in underwater concrete)
innovation projects are compared. Table 1 presents can end up in a competition to learn.
a summary of the case study findings. The other case studies were mainly based on gain-
ing access to complementary capabilities in which
Access to Technological Knowledge partners perceived a win–win situation. Partners
were selected based on their specific expertise in a
The PBI often focuses on ad hoc strategies for pro- field that was important to develop the intended in-
jects. Research has shown that project-based working novation. Cases Beta, Gamma, and Delta were not
can act as a major limiting factor for learning and in- aiming at learning each other’s capabilities, but part-
novative potential (Dubois and Gadde, 2002; Gann ners were mainly interested in having access to and
and Salter, 2000; Keegan and Turner, 2002; Prencipe combining each other’s technological capabilities. In
and Tell, 2001; Winch, 1998). From the knowledge- case Delta, the partners stated clearly that they did
based view and alliance literature it is known that not share technological knowledge with each other
learning competencies from partnerships are impor- but that they applied their specific competence in the
tant to develop competitive capabilities (Hamel, project. All partners in both Case Gamma and Case
1991). These studies focus on organizational learning Delta kept their own competence base and did not
and absorptive capacity (Lane and Lubatkin, 1998; broaden their competence with the technological
Mowery et al., 1996). Grant and Baden-Fuller (2004), knowledge of the other partner. The firms in these
however, stated that the primary advantage of alli- two case studies maintained differentiated knowledge
ances is in gaining access to knowledge rather than in bases, which according to Grant and Baden-Fuller
acquiring knowledge. Firms have access to their part- (2004) can develop in a stable and long-term relation-
ner’s stock of knowledge to exploit complementari- ship. Especially in Case Gamma (some relationships)
66 J PROD INNOV MANAG P. M. BOSCH-SIJTSEMA AND T. J. B. M. POSTMA
2009;26:58–70

Table 1. Summary of Case-Study Comparison

Case Alpha Case Beta Case Gamma Case Delta

Partners Contractor firm (initiator) Large contractor Consultant firm in Architect firm
Suppliers (concrete, firm (initiator) construction (initiator) Holding firm:
diving and concrete pumps) Large concrete Universities -knowledge center
R&D institutes (testing development firm R&D institutes (initiator)
prototypes and method) Suppliers (steel, concrete, - selling center
installations)
Contractor

Knowledge Transfer of knowledge Access to each other’s Access to each other’s Access to each other’s
Capabilities through patents, capabilities in capabilities in technological capabilities in technological
publications. construction, processes knowledge about concrete, knowledge about 3D
Transfer through and concrete. Learning steel and installations. modeling, innovation
experience. Learning of market knowledge Acquiring and developing processes and calculation
method and product by knowledge in organizational techniques. Learning of
project partners issues and market knowledge implementation of
innovations and process
of innovation project.

Governance Contract and price- Pure mutual-trust Trust relationships with Trust relationships with
mechanisms based relationship based relationship standard contract standard contract

Openness and Competitive. Open and transparent Openness and transparency Openness and transparency
transparency Closed and no for the project high in conceptual and high throughout whole
transparence in sharing exploitation phase. project.
knowledge

Intent of Win-lose strategy Slight win-win strategy Win-win strategy in Win-win strategy for
cooperation (not high priority in conceptual and all firms.
both firms) exploitation phase

and Case Delta these cooperative relationships devel- Organizational and Market Knowledge
oped mutual competence and intentional trust and
built a long-term commitment (this commitment was As mentioned already, a large part of the literature on
extended to other business projects as well). Hamel alliances and partnerships focuses on learning and
(1991) explained this by stating that firms converge knowledge transfer. From the cases it became clear
into long-term relationships as a consequence of that partners especially gained access to their cooper-
their strategic intent to do so. Also, the cooperation ating partner’s technological knowledge. However,
develops over time because firms mutually generate the cases show that besides technological knowledge
competence and intentional trust through openness (which implies expert knowledge about the content of
and transparency of knowledge transfer. Sydow the innovation), other types of knowledge were im-
(1998) stated that when trust is once established portant in the cooperative projects. These kinds of
in an interorganizational relationship, it stabilizes knowledge were either transferred between the part-
exchange relationships, which in turn increase ners or were developed within the cooperation. From
chances to enhance trust. Furthermore, trust could the case studies we learn that organizational and mar-
constitute trustworthiness and, in the end, competitive ket knowledge were transferred or developed. In the
advantage. early phases of the innovation projects (development
of concepts) the focus of the partners was mainly on
Proposition 1: Cooperation aimed at a mutual strategic
specifying each other’s knowledge base (technological
benefit in mutually gaining access to the knowledge capabilities) in such a way that tasks could be allo-
bases of the involved firms while maintaining their own cated according to the specific knowledge base.
differentiated knowledge base can result in a more In the early phase of an innovation project, mem-
stable and longer-term relationship with mutual trust bers discussed mutual expectations, risks, financial
between the cooperating firms. aspects, division of tasks (based on each others’
COOPERATIVE INNOVATION PROJECTS J PROD INNOV MANAG 67
2009;26:58–70

capabilities), and governance issues for the innovation knowledge and the governance mode of contracting
project. In later phases, knowledge transfer and cre- (making use of the market) was investigated (Fey and
ation focused more on creating experiences in real-life Birkinshaw, 2005). The authors found a negative re-
situations for testing and prototyping. These experi- lationship between situations in which knowledge is
ences were in organizational experiences of how to set more codifiable and leakage (spillover effects) of
up such a real-life test and what to do with the tests knowledge toward contracting partners becoming
results of the prototypes (e.g., problems). Partner more evident. These results confirm the situation in
firms mentioned that they together developed Case Alpha, in which a contracting mode of gover-
knowledge about the process of innovation and the nance was used and knowledge was leaked to the con-
organization of the innovation project (especially im- tracted partners of Case Alpha. The knowledge was
plementation aspects were learned in Case Delta). In leaked in such a way that the partners became compet-
the final phase of the innovation project, competen- itors on the developed innovation. Case Beta, Case
cies about the market and the customers became more Gamma, and Case Delta all concerned knowledge that
important. In Case Gamma, the initiating firm at- was more difficult to transfer and codify, and the knowl-
tracted new firms that had a good overview of the edge was based on expertise and experience in specialist
market and the requirements of its customers. In these areas. The partner firms in these cases had specific (firm)
relationships, other knowledge besides technological inimitable capabilities that they contributed to the part-
knowledge was contributed by the partner firms. nership. This knowledge is more difficult to transfer to
Importantly, in especially Case Gamma and Case competitors. In Case Gamma and Case Delta parties
Delta, was that partners developed a mutual trust- did not transfer this knowledge but created new knowl-
based relationship to combine technological knowl- edge in combining the different competencies.
edge and to share and develop organizational and
market knowledge. For example, in Case Gamma it Proposition 3: In a cooperation aimed at a mutual stra-
was necessary for the partner firm to have experience tegic benefit in mutually gaining access to the knowl-
and mutual trust with the initial firm of Case Gamma edge bases of the involved firms, noncodifiability of the
before it was willing to present market information to capabilities is conditional to create a win–win situation.
the leading firm. Firms gained not only access to and
created technological knowledge but also knowledge Governance Mechanisms
about the other firms (their way of working, organiz-
ing, and way of perceiving the market; see Case The innovation projects that were most successful in
Gamma and Case Delta and partly Case Beta). Learn- terms of long-term cooperation (Case Gamma and
ing about the other firm helped to develop a mutual Case Delta) applied a governance structure in which
trust relationship and continuation of the relationship the main focus was on mutual trust (both competence
(in Case Gamma and Case Delta). and intentional trust). However, besides trust, the co-
operation also involved a general contract that dealt
Proposition 2: In a cooperation aimed at a mutual stra- with issues like ownership, conflict situations, and fi-
tegic benefit in mutually gaining access to the knowl- nancial aspects. This is also in line with recent findings
edge bases of the involved firms, partners not only gain stating that contracts and (high) trust go hand in hand
access to each other’s technological capabilities but also
(Klein-Woolthuis et al., 2005). Some studies compare
develop and share knowledge about organizational as-
different forms of partnerships (Fey and Birkinshaw,
pects and market situations and gain knowledge about
the way of working of the partner firms.
2005; Thompson and Sanders, 1998) in which they
usually describe two extremes: partnering and con-
tracting. Partnering refers to developing new knowl-
Codifiability of Knowledge edge through relationships with specific partner firms
based on mutual trust (e.g., strategic alliances, con-
In knowledge literature, the transferability of knowl- sortia of suppliers and customers). Contracting refers
edge is an important issue. Knowledge that cannot be to acquisition of knowledge on a market basis. Firms
easily observed and codified is rare, costly, and diffi- with an arms’ length contracting relationship focus
cult to transfer (Spender, 1994). This type of knowl- mainly on the output of the relationship instead of on
edge brings a competitive advantage to firms. In a the development of knowledge. For coordination of
recent study, the interaction between codifiability of their activities, they apply a price system (see Hennart,
68 J PROD INNOV MANAG P. M. BOSCH-SIJTSEMA AND T. J. B. M. POSTMA
2009;26:58–70

1993). In a price-based system agents are rewarded mechanism, whereas contracting between market par-
based on their outputs; price constraints, however, ties aimed at knowledge–output transactions is repre-
also encourage cheating. sented by limited trust and arms’ length (contractual)
Case Alpha refers to sole contracting, whereas Case relationships as its main governance mechanism.
Gamma and Case Delta (and partly Case Beta) are
perceived as partnering relationships (partnering in A final note is that from our case studies one learns
this respect is a governance mechanism and should that it is difficult for firms in the construction industry
not be confused with partnering in the construction to execute development projects because some firms
industry for business projects between customers and had little experience in performing innovation pro-
suppliers; see, e.g., Bresnen and Marshall, 2000). jects in cooperation with other firms outside business
From the case studies, it becomes clear that in a con- projects. For Beta, Gamma, and Delta, the develop-
tracting relationship, members are less open to shar- ment of longer-term relationships outside the scope of
ing information and there is limited trust between the business projects took time and energy. This is con-
partners (see Case Alpha). Furthermore, because firmed by other studies in project-based industries,
there is limited trust, the cooperation is based on a which indicate that projects are always performed in a
contract in which tasks, risks, responsibilities, and fi- context and have a history (Engwall, 2003) and that
nancial aspects are discussed in detail. A partnering managers of innovation projects are influenced by
relationship that is based on mutual trust can develop their experiences of managing business projects. These
into a long-term commitment of the involved parties managers had more difficulty with innovation pro-
as in Case Gamma and Case Delta. Here, partners jects with high uncertainty and unclear targets
relied on each other’s competencies and were open in (Blindenbach-Driessen and Van Den Ende, 2006).
sharing knowledge and information with each other.
Industries with free-flowing information trading are Conclusion and Discussion
found to have lower search costs and more innovation
(von Hippel, 1988). Powell (1996) found that not all In this paper innovation projects in a PBI (construc-
trust-based governance operates in the same fashion. tion industry) are discussed, and a knowledge-based
He discussed R&D networks in which trust was based perspective is applied. From current literature, an im-
on a common membership in a professional commu- portant issue in project-based environments is the low
nity (technologic or scientific community). Especially performance in innovation (Winch, 1998). Others
in Case Gamma this kind of trust governance was found that firms based on projects do not provide a
found in the conceptual phase (scientific community), context supportive of innovation, since they prioritize
whereas Case Beta shared a technological community. efficient management of projects (Keegan and Turner,
In the production phase of Case Gamma, longer-term 2002). Especially in project-based firms, most coop-
manufacturing relationships were developed, and eration focuses on a contracting relationship instead
trust grew over time in this relationship. In the alli- of on a trust-based relationship. In the Dutch con-
ance of Case Delta, the partners also mentioned that struction industry, partnering relationships are on the
an open environment and mutual trust took time to one hand demotivated by governmental regulations
develop. This is confirmed by Powell, who discussed and on the other hand firms afraid of knowledge
trust governance of alliances and collaborative man- leakage and competition. Following Blindenbach-
ufacturing as emerging out of a mutual dependency Driessen and Van Den Ende (2006) we distinguish
and pointed out that trust must be created in these between business projects and development or inno-
cooperatives. It is assumed that trust between coop- vating projects. In this paper the latter category is
erating firms contributes to significant reduction of studied. The first part of our research question dealt
transaction costs, opens up opportunities for strategic with the kind of capabilities acquired or gained access
action, enhances system stability, yet supports orga- to and their implications for the cooperation. From
nizational change (Sydow, 1998). our findings in the different case studies it is derived
that firms based on projects can create a more
Proposition 4: A cooperation aimed at a mutual stra- innovative context when they cooperate and aim for
tegic benefit in mutually gaining access to the knowl- complementary capabilities. This implies that firms
edge bases of the involved firms is based on mutual should gain or give access to and should combine
competence and intentional trust as its main governance these capabilities but should essentially keep their
COOPERATIVE INNOVATION PROJECTS J PROD INNOV MANAG 69
2009;26:58–70

own separate knowledge base instead of broadening Third, certain conditions are important for accom-
their knowledge base with technological capabilities of plishing a cooperative innovation project. One main
cooperating partners. Partnerships with complemen- condition is the support (both managerial and financial)
tary technological capabilities and mutual trust of higher management of the participating firms. Espe-
relationships develop and share (new) knowledge on cially managerial support increases the opportunity of
organizational and market issues. A strategic focus of transferring knowledge and internalizing this knowledge
firms on cooperation based on giving access to and in the firm. Furthermore, the strategic importance of the
combining each others skills, instead of acquiring, can project legitimizes the acceptance and internalization of
be positive for the innovative potential and for devel- new knowledge in the partner firms. When there is a low
oping and strengthening a competitive advantage. strategic importance, there is probably a lack of mana-
The second part of our research question discussed gerial support for internalizing new knowledge.
the governance mechanism applied by the innovation Finally, the participating firms working according to
projects. It was found that firms focusing on mutually project-based principles should formulate a strategy of
gaining access to the knowledge bases of their part- how to transfer knowledge of partner firms’ capabilities
ners can develop a stable relationship based on or new knowledge of the innovation project to the
mutual trust as their main governance mechanism. business projects. The internalization of the gained
According to Gann and Salter (2000), development knowledge from the cooperation becomes important
projects should not be separated from the rest of the or- for business projects as well. Besides the formulation of
ganization, since this gives undesired side effects. These a strategy, the PBF could focus on showing the benefits
side effects can be found in the internalization of partner and consequences of new knowledge in the form of les-
firms’ capabilities or in absorbing the new knowledge sons learned and success stories. Other possibilities are
developed during the innovation project. Furthermore, promoting knowledge sharing over project boundaries
awareness of history, path dependency, and context of by boundary spanners (e.g., personal contacts across
project-based firms in performing business projects is functions and or projects, liaison roles, cross-project
important (Blindenbach-Driessen and Van Den Ende teams; see Cohen and Levinthal, 1990) or an incentive
2006; Engwall, 2003). The way a business project is per- structure (e.g. based on team performance).
formed is usually based on contracting governance The findings of this study are based on a few case
mechanisms and output-oriented transactions, whereas studies in one country, but the cases illustrate the
an innovation project is organized and coordinated propositions and the discussion on knowledge acces-
rather differently and firms aim at gaining access to sibility and governance mechanisms in cooperative
knowledge bases of their cooperation partners. innovative projects. Further research in this field is
The paper concludes with some practice-oriented needed to be able to present frameworks and guide-
suggestions based on this study for firms in project- lines for project-based firms on how to govern and
based environments. Succeeding in transferring and manage cooperative innovative projects.
creating knowledge in cooperative innovative projects
is based first on the selection of partners. This selec-
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