Headquarters’ Control Capacity and the Choice of R&D Organizational Forms Abroad
AbstractThe paper aims to explain the choice of organizational forms by multinational companies (MNCs) when decentralizing abroad their R&D activities. We identify five main organizational forms: wholly owned green-field subsidiary, wholly owned acquired subsidiary, joint venture, cross-licensing agreements and unilateral licensing agreements. On the basis of questionnaires addressed to the R&D managers of American and European MNCs, we highlight that the choice of an organizational form is related to the firm’s capacity of control, performance measurement and incentive systems, to resolve the agency conflicts in each form. Our findings show that the internalization choice is underprivileged because of behavioral control difficulties. The possibility of ensuring a strategic performance evaluation of R&D activities favors the cross-licensing agreement over the joint venture choice. Finally, the choice of unilateral licensing agreements is not supported because of feasibility issues concerning the financial evaluation of the performance of R&D activities.
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Bibliographic InfoPaper provided by Université de Bourgogne - Crego EA 7317/Fargo (Research center in Finance,organizational ARchitecture and GOvernance) in its series Working Papers FARGO with number 1090503.
Length: 25 pages
Date of creation: May 2009
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Postal: Gérard Charreaux, Fargo-Leg, Université de Bourgogne 2 Bd Gabriel, BP 26611, 21066 Dijon Cedex, France
Find related papers by JEL classification:
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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- William G. Ouchi, 1979. "A Conceptual Framework for the Design of Organizational Control Mechanisms," Management Science, INFORMS, vol. 25(9), pages 833-848, September.
- Jon I Martinez & J Carlos Jarillo, 1989. "The Evolution of Research on Coordination Mechanisms in Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan, vol. 20(3), pages 489-514, September.
- M Krishna Erramilli, 1996. "Nationality and Subsidiary Ownership Patterns in Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan, vol. 27(2), pages 225-248, June.
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