If a company decides to set up an R&D joint venture, finding a suitable partner is of crucial importance. The partner has to match the company on several levels in order for the cooperation to be successful. A partner can be assessed on the basis of several factors. Not all factors are equally important for the cooperation. That depends on and varies from cooperation to cooperation.
1. Proximity paradox
Research has shown that the better the partners are aligned on different levels, the more effective the cooperation becomes. However, partners who are too closely aligned with each other work less together. For instance, cooperation with a company that has similar capacities in the same sector is often impossible because the competing interests outweigh the intention to cooperate. It is claimed that effectiveness first increases with proximity, but decreases after some time if the proximity is too great. This is known as the proximity paradox. It has not been fully confirmed by research, however and needs to be studied further.
1.1 Proximity in knowledge
The proximity in knowledge reflects the degree to which two companies complement each other at the knowledge level. Research has shown that the effectiveness of cooperation in relation to the level of knowledge of two companies is an inverse U-form. This implies that companies that are either too distant in terms of knowledge or conversely very close, cannot cooperate effectively. If the two companies operate at a completely different level of knowledge, then one of them has to deliver more knowledge than it can absorb, whereby the cooperation cannot be considered to be efficient. Furthermore, it is much easier to absorb and communicate knowledge to another company if the two companies involved have a similar level of knowledge.
If the knowledge level is too similar to that of the other company, however, the cooperation becomes quite a bit trickier because the competitive advantage of one company is weakened and it does not get any positive effect from the cooperation.
Proximity in knowledge is often a decisive factor in R&D. Good communication and absorption of knowledge are essential for effective cooperation.
1.2 Social similarity
Social similarity refers to personal contacts of employees in cooperating companies. Acquaintances at another company boost trust and confidence and improve communication, and this in turn has a positive influence on the efficiency of the cooperation. Both parties learn far faster from each other, trust and confidence enable them to take more risks, the expectations are clearer, etc. In a word, the cooperation is more efficient. The risk of free-riding, whereby one party only takes knowledge without giving anything back, is greatly restricted by social control carried out by acquaintances. (Maskell & Malmberg, 1999)
The proximity paradox plays a role here once again. Too much social similarity or commitment means that the cooperation is no longer effective because both parties are too loyal or share too much of their knowledge without turning the process to advantage for their own business.
1.3 Institutional similarity
The purpose of a not-for-profit organization is to increase the prosperity of its surroundings, whereas the main purpose of a for-profit organization is to turn a profit for the shareholders. In this respect, these types of companies could not be more different. Nevertheless, cooperation does take place also, e.g. between a company from the private sector and a university. Both organizations can avail themselves of each other’s capacities and knowledge. They pursue a different goal, but they help each other to achieve it. The intention of companies from the private sector is to protect their findings from the competition, whereas a university has a duty to disseminate its knowledge as much as possible. This difference can be considered to be institutional.
1.4 Geographic location
Better a good neighbour than a distant friend. The geographic location has a decisive influence on the afore-discussed parameters. For example, the level of knowledge of companies that are located are close to each other will usually be similar if they have the same means and resources. Social similarities will also be more prominent, which can have a positive influence on the cooperation. Direct contact is not necessary in these times of technological communication progress, but it turns out the cooperation is established more quickly when employees from the two companies see each other face to face. It is easier for companies to establish contacts with partners who are located in their vicinity, for instance when influential employees know each other from the neighbourhood. Geographic proximity has a positive effect when the difference in the institutional aspect is too great. This means that companies will find it easier to cooperate with a university, for instance, if it is located closer.
2. Do both partners want the same thing?
The company must be fully (100%) behind the cooperation. Given the money pumped in and the risks taken, the company will want a return. The cooperation will be successful only if the partners know about each other’s ambitions. Furthermore, these ambitions should preferably be complementary. If a project of the cooperation succeeds, whereupon one of the partners wants to expand it, but the other does not want to take part in the continuation thereof, this will cause enormous tensions in the cooperation. It is therefore necessary to seek a partner with the same view on ambition, duration and attitude to the risks and investments. It is also necessary to check beforehand whether the partner has the necessary capacities and skills to meet the expectations in practice. The agreements made must be discussed and signed as independently as possible. If a different management determines the future for one reason or another, there is still a certainty that the cooperation arrangement will survive. It is advisable to sit down several times with the people from the organization in order to ascertain whether they are still on the same wavelength and/or whether the expectations/ambitions need to be updated. (Vanhaverbeke, Managing Innovation Networks, 2017) (Chesbrough, 2013) (Santamaria & Surroca, 2011).
3. Innovation network
An organization can cooperate with different partners on a particular project, whereby a network of partners is created. As there are more partners here, the chance of tension is greater. The organization has to find a way to guide, support and motivate the partners to get behind the project. The way to deal with the innovation network differs from sector to sector and from project to project. Nevertheless, there are some basic rules that belong to good management. (Vanhaverbeke, Managing Innovation Networks, 2017)
Communication is vital in a cooperation by and between two or more partners. The different partners should report on their progress as comprehensively as possible to the rest of the innovation network. The organization must justify its requested price as well as possible when products or services are sold by and between the partners in the network. If the partner asks an unreasonable price, this will create great tension and a feeling that the company wants to take advantage of its partners. The partner who buys a product or service from his partner usually wants a special price because they work in the same network. An organization that thinks it is being charged too high a price can always compare that price with that of a third party outside the network. Not only must the costs be shared, but the profits must be distributed equitably among the different partners. In order to limit tensions and problems as much as possible, clear agreements must be made with the partners to establish mutual trust and confidence. Communication plays an important role here. In an innovation network, the rules in this respect are usually determined by the largest and most important organization of that network, which can make them contractually binding. (Vanhaverbeke, Managing Innovation Networks, 2017)
3.2 External and internal management
When setting up an open innovation network, it is important to ensure that the internal management of each organization is attuned to external management of the innovation network. The organization must thereby ensure that the communication by and between those responsible for the internal and external management is established and maintained. In smaller organizations this is usually done by the same body, for the sake of easier supervision. The balance between internal and external management must be seen as being dynamic and thus susceptible to change during the cooperation. (Hagedoorn, Roijakkers, & Van Kranenburg, 2006).
3.3 Dealing with tensions and problems
Problems and tensions must be managed proactively so as not to cause major problems in the innovation of the organization. It is impossible to predict how partners will react if certain problems occur during the project. Problems or tensions can put pressure on the cooperation and can spell the end of the cooperation if they are not properly managed. It is best to communicate with each other at fixed intervals about what could possibly lead to a problem or conflict. All partners should broach each problem in an open and communicative way so that the cooperation can remain guaranteed and optimal. (Vanhaverbeke, Managing Innovation Networks, 2017).
3.4 Maintaining the network
At the start of a cooperation, all partners are motivated and willing to commit themselves fully to the project. After a certain period, as less and less progress is made, the cooperation can well come to a standstill. If no action is taken after a long period of inactivity, it will prove fatal to the cooperation. It is therefore of crucial importance to motivate and activate the other partners during such ‘quiet moments’. This is referred to as the ‘connective capacity,’ i.e. the ability to maintain knowledge in an inter-organizational relationship and have exclusive access to external knowledge without possessing it. (Lichtenthaler, 2009). By developing their connective capacity, the organization can activate its network more easily when needed (Vanhaverbeke, Managing Innovation Networks, 2017).
A great deal of research is being conducted into the efficiency and quality of R&D collaborations. You can help such research to get ahead by completing this questionnaire (in Dutch - a study conducted by Bert Depré, student)