Somewhere between Markets and Hierarchies: Controlling Industry University Relationships for Success

Abstract

INTRODUCTION The competitive landscape for many firms continues to be re-invented due to rapid technological change, shorter product life cycles, and intense global competition (Ali, 1994; Bettis & Hitt, 1995). In order to successfully compete and survive in this changing competitive environment, firms must continually learn and advance new technologies. Organizational learning, and the subsequent ability to advance new technologies can be accomplished both intra- and inter-organizationally. An extensive literature continues to grow on the advantages of interorganizational collaboration (e.g., Hail, Link & Scott, 2003; Adams, Chiang & Starkey, 2001; Jarillo, 1988; Parkhe, 1993; Pisano, 1990; Shan, Walker & Kogut, 1994) since firms are finding it increasingly more difficult to rely solely on intra-organizational initiatives due to limited expertise and resources (Tether & Tajar, 2008; D'Este & Patel, 2007; Hamel & Prahalad, 1994). While much of the inter-organizational literature concentrates on alliances between two or more industrial firms, a growing trend toward industry-university (I/U) collaboration demands that more scholarly attention focus on I/U relationships (Harryson, Kliknaite & Dudkowski, 2007, 2008; Betz, 1996; Cohen, Nelson & Walsh, 2002; Fritsch, 2003; George, Zahra & Wood, 2002; Johnson, Bianco, Grucza, Crawford & Whiteley, 2003; Quetglas & Grau, 2002; Adams, Chiang & Starkey, 2001; SRI International, 1997). The dynamic nature of I/U alliances and the uncertainties of its outcomes contribute to making the internal mechanisms of a hierarchy or the explicit contracts of a market unreliable in providing adequate governance and control. Thus, I/U relationships often resemble an intermediate form of governance somewhere between the strict boundaries of hierarchies and external markets. Prior research has not investigated the specific governance mechanisms used to insure equity in these relationships that serve to protect the interests of both parties (Gray, Linblan & Rudolph, 2001; Geisler, 1995). Moreover, few studies have explored the different developmental stages of I/U relationships and the specific factors facilitating each of these stages. This study addresses these needs in the literature and makes a contribution in two important ways. First, we focus on the understudied area of industry-university collaboration and closely examine two important stages of I/U relationships, i.e., the initial establishment stage and the continuing stage. Second, we explore the key antecedent governance factors that facilitate each of these two stages and investigate the possible linkage these key antecedent factors for each stage may have on learning and technological outcomes. BACKGROUND AND RESEARCH CONSIDERATIONS Industry-university relationships have a long history (Furman & MacGarvie, 2007). For example, the German pharmaceutical firm Bayer created relationships with universities as far back as the late 19th century (Bower, 1993). In the US, the National Research Council united scientists in the research-oriented universities with those in industry to assist the war effort during World War I (Reams, 1986). Today, industrial firms and universities work together for a number of reasons. For example, industrial firms gain access to highly trained students, professors, facilities, and new technologies (NSF, 1982a). Firms can also enhance their image and reputation when partnering with a prestigious academic institution (Fombrun, 1996). In contrast, universities primarily interact with industrial firms in order to obtain additional funds, particularly to support various research initiatives (NSB, 1996; NSF, 1982a). Research funding from industrial firms is especially appealing since it often involves less bureaucratic red tape than funds from federal or state agencies. Universities also work with firms to expose students and faculty members to practical problems, create employment and internship opportunities for university graduates and students, and to gain access to applied technological areas (Lam, 2007; Austen, 2003; NSB, 1996). …