Between trust and control in interorganizational collaboration – rethinking formal and informal governance in R&D alliances

Purpose: Trust and control through contracting have been juxtaposed in many studies addressing interorganizational collaboration and knowledge exchange. In this study, the authors move from the opposite ends of a continuum between trust as an attitude and control exercised through formal contracts toward the center of the continuum where trust and contracting start to show similar features. The authors ask how trust in its analytical form and control gained through establishing informal protection for knowledge assets affect the innovation and market performance of firms engaged in research and development (R&D) alliances. Design/methodology/approach: The authors examine the existing literature and conduct a quantitative empirical study to answer the research question. Findings: The authors find, first, that controlling an organization’s own knowledge assets in R&D alliances with informal means of protection can be more effective than a strategy of controlling the alliance through formal contracts. Second, the authors find that an analytical audit of partner trustworthiness, and especially partner capabilities and goodwill can be more effective than trust as an attitude. Research limitations/implications: The findings support softening the sharp distinction between trust and control and provide evidence on the relevance of highlighting the firm point of view in knowledge management in R&D alliance governance. Originality/value: The study adds to the existing understanding of trust and control in R&D alliance governance. Specifically, the authors turn the focus from interorganizational governance to intra-organizational knowledge management measures, and particularly toward how a focal actor can take an analytical approach to evaluate partner trustworthiness and use informal control in protecting its own knowledge assets. Consequently, this study also provides a plausible explanation for the contradictory findings in studies that examine the relationship between trust and control. The study indicates that depending on the specific nature of trust and control, they can be either a complement or a supplement factors: the extreme forms of trust and control are notably different from those forms that share similar features. © 2019, Emerald Publishing Limited.