Rachelle Sampson
Joanne Oxley

Participants in research and development alliances face a fundamental tension: successful completion of alliance objectives often requires pooling of technological knowledge and risk of appropriation by alliance partners. There is considerable empirical evidence that these "appropriability hazards" affect the governance structure chosen for R&D alliances, but this does not exhaust the set of possible responses of alliance partners. In this paper we explore an alternative response to elevated hazards: reduction of the "scope" of the alliance. We argue that when partner firms are direct competitors in end product or strategic resource markets even "protective" governance structures such as equity joint ventures may provide insufficient protection to induce extensive knowledge sharing among alliance participants. Rather than abandoning potential gains from cooperation altogether in these circumstances, partners may choose to limit the scope of alliance activities to those that can be successfully completed with limited (and carefully regulated) sharing of knowledge assets. Our arguments are supported by empirical analysis of a sample of international R&D alliances involving electronics and telecommunications equipment companies.