Technology Analysis & Strategic Management

ISSN: 0953-7325 (Print) 1465-3990 (Online) Journal homepage: http://www.tandfonline.com/loi/ctas20

Governance factors enabling knowledge transfer

in interorganisational development projects

Petra M. Bosch-Sijtsema & Theo J.B.M. Postma

To cite this article: Petra M. Bosch-Sijtsema & Theo J.B.M. Postma (2010) Governance factors
enabling knowledge transfer in interorganisational development projects, Technology Analysis &
Strategic Management, 22:5, 593-608, DOI: 10.1080/09537325.2010.488064

To link to this article: https://doi.org/10.1080/09537325.2010.488064

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Technology Analysis & Strategic Management
Vol. 22, No. 5, July 2010, 593–608

Governance factors enabling knowledge

transfer in interorganisational development
projects

Petra M. Bosch-Sijtsemaa∗ and Theo J.B.M. Postmab

a WorkPsychology and Leadership, Aalto University School of Science and Technology, Finland and Project-Based
Learning Laboratory, Stanford University, Stanford, USA; b Faculty of Economics and Business, Groningen University,
Groningen, The Netherlands

In this study we examine governance factors affecting knowledge transfer in interorganisational

development projects. There is a gap in the literature indicating a need for more insights into
processes of knowledge sharing and governance of interorganisational development projects.
By using cases from the Dutch construction industry, we discus how interorganisational devel-
opment projects are governed and what impact this has on knowledge transfer between the
firms involved. We find that knowledge transfer towards participating firms cooperating in an
interorganisational development project is positively influenced when partners govern their
cooperation by using mutual trust and contract complementary.

Keywords: governance mechanisms; knowledge transfer; interorganisational development

projects; construction industry

Introduction
Interorganisational research and development relationships are increasingly recognised as
important contexts for transferring technological knowledge and learning between firms (Faems,
Janssens, and van Looy 2007). We are interested in the governance mechanisms that affect the
transfer of knowledge in interorganisational development projects, in which ideas, methods and
products are developed. A network of cooperating firms, like the project-based organisation (Gann
and Salter 2000) or project networks (Sydow and Staber 2002) differ from traditional project struc-
tures, related to difficulties of learning over project boundaries and the sharing of capabilities and
knowledge (DeFillippi and Arthur 1998; Ekstedt et al. 1999; Prencipe and Tell 2001). We know
from extant literature that firms rely on formal links, such as contracts, with other organisations
to increase their knowledge base. From innovation research we learn that for collaborative inno-
vation activities, relational governance can similarly be important (Das and Teng 2001; Dyer
and Singh 1998; Gulati 2007; Nooteboom 2000; Williamson 1985). Formal contracts deal with

∗ Corresponding author. Email: petra@petrabosch.com

ISSN 0953-7325 print/ISSN 1465-3990 online

© 2010 Taylor & Francis
DOI: 10.1080/09537325.2010.488064
http://www.informaworld.com
594 P.M. Bosch-Sijtsema and T.J.B.M. Postma

exchange hazards between partners, relational governance, such as trust, acts as the lubricant that
is necessary for enduring relationships (cf. Gulati 1995; Uzzi 1997).
Although both forms of governance may be prevalent in interorganisational development
projects, there is still a need to explore their ubiquity and relationship (Poppo and Zenger 2002).
Moreover, from interorganisational relationship literature we know that interorganisational devel-
opment relationships are gauges for transferring knowledge (Mowery, Oxley, and Silverman
1996). Faems, Janssens, and van Looy (2007) indicate that in R&D relationships detailed con-
tracting can be effective in knowledge disclosure, but suggest that more research is needed on the
impact of governance mechanisms on the potential for interorganisational knowledge transfer (p.
1722). Therefore, we infer that governance mechanisms may influence knowledge transfer among
project partners, but, however, additional research is necessary. For instance, formal contracts may
signal distrust and by doing so discourage open knowledge transfer, while too much relying on
trust may lead to leakage or spillover of knowledge to competitors (Liebeskind 1996; Poppo and
Zenger 2002; Seely Brown and Duguid 2001). The main challenge of this paper is to address the
question of how interorganisational development projects are governed and what kind of knowl-
edge is transferred to the involved organisations. Our research context is the construction industry.
The construction industry is interesting, because it has been stated to lag behind in innovation
compared to other industries (Veshosky 1998; Winch 1998) and increasingly interorganisational
development projects are initiated to boost innovation and knowledge transfer in order to survive
in the current market.
The structure of the paper is as follows. Below we first discuss governance mechanisms and
knowledge transfer literature (Section 2). In Section 3 we present the methodology for collecting
data and introduce the case studies of interorganisational development projects in the Dutch
construction industry. In Section 4 we present the findings of the case studies and in Section 5 the
results are discussed. We conclude in the last section.

Theoretical background
This section first goes into the subject of governance and subsequently its meaning for knowledge
transfer is indicated.

Governance in interorganisational projects

According to Sydow, Lindkvist, and DeFillippi (2005), projects are highly autonomous with goals
set in terms of time, money and outcome qualities. ‘What’ is clearly defined, ‘how’ to get to these
goals is usually not clearly defined (and calls for new or customised procedures and processes).
Projects comprise of members from different specialties, with different knowledge bases and
ways of interpreting experience, which need to be governed or coordinated. Coordination is a
consciously organised relation between activities or forces (Hatchuel 2001). According to Jansen,
Steenbakkers, and Jägers (1998) mechanisms in this context can be divided into two kinds. The
first consists of directing or explicit mechanisms: creating clarity through monitoring and control
activities and drawing up rules and procedures by means of explicit agreements or contracts.
Informed largely by transaction cost economics (e.g. Williamson 1986), the theoretical reasoning
for this relationship is that it focuses on the legal rule underpinning it, reflected by ‘sharp in by clear
agreement; sharp out by clear performance’ (p. 102). In the construction industry coordination
is often performed by using contracts (see e.g. Reve and Levitt 1984). Formal contracts specify
promises or obligations to perform certain actions in the future (Poppo and Zenger 2002). These
Governance factors enabling knowledge transfer in interorganisational development projects 595

contracts are of utmost importance for spreading risks, delineating responsibilities and defining
the goal and deadlines, tasks and interdependencies between the firms. Contracts will be more
extensive when exchange relationships in interorganisational cooperative projects increase in their
complexity or become more hazardous.
The second group of mechanisms concerns conditional or implicit mechanisms: promoting
cooperation as a result of (temporary) interaction and developing mutual understanding and trust
between individuals and or organisations and functions. Following Mayer, Davis, and Schoorman
(1995, 712), trust is defined as ‘the willingness to be vulnerable to the actions of another party
based on the expectation that the other will perform a particular action important to the trustor,
irrespective of the ability to monitor or control that other party’. A lower risk perception tends to
decrease the perceived risk of opportunism, may make project partners more confident to share
information and knowledge and to engage in wide-ranging, continuous and intense knowledge
sharing and decision-making (Kale, Singh, and Perlmutter 2000). In addition, personal needs
are more easily subjugated for the common corporate objective, which reduces the probability
of conflict. Finally, the coordination and control, or in other words the governance, of a project
through project management can reduce development time and decrease costs.
The governance of an interorganisational development project determines knowledge transfer
between the partners involved. The main task of governance in interorganisational relationships
is controlling relational risk caused by opportunism and dependency of firms (Nooteboom 1999).
Relational risk is defined as the probability and consequences of not having a satisfactory coop-
eration (Das and Teng 2001). The relationship between the cooperative partners in project-basing
can be generally influenced by a set of governance mechanisms that can either inhibit or stimulate
knowledge transfer in an innovation process (e.g. through contracts and trust-based relationships).
Particularly for innovation and learning more informal governance mechanisms, i.e. reputation
and trust, compared to formal instruments such as detailed contracts or procedures for moni-
toring, can be relevant. In our discussion of trust-based relationships we combine two aspects
of trust, i.e. competence and intentional trust, meaning respectively trust relying on compe-
tences and trust based on the intentions (dedication and goodwill) towards a relationship (Klein
Woolthuis, Hillebrand, and Nooteboom 2005; Nooteboom 2000). Barney and Hansen (1994) sug-
gests that in strong trust partnerships, the rewards of innovation and knowledge transfer which
are based on trust and reduction of information asymmetry will gain in time through projects
(Li et al. 2008).

Knowledge transfer
A large amount of literature on knowledge creation and transfer comes from the interorganisational
relations field. From this literature we know that the pursuit of cooperative strategies can be used as
a means for creating knowledge or gaining access to knowledge and skills outside the boundaries
of the firm (Hamel 1991; Gulati 2007; Kogut 1988; Lane and Lubatkin 1998; Wathne, Roos, and
von Krogh 1996). The concept of knowledge transfer is hard to define. The distinction between
the transfer of knowledge and creation of new knowledge is not always clear. Recipients of
new knowledge normally devote substantial resources to assimilate, adapt and improve upon
the knowledge, where modification and further development often are part of the transfer of
knowledge. Knowledge transfer in this article is the process of assimilation, adoption, transforming
(creating new knowledge) and diffusion of knowledge (Bresman, Birkinshaw, and Nobel 1999;
Nonaka and Takeuchi 1995; Zander 1991). Knowledge can be perceived in explicit (codified)
596 P.M. Bosch-Sijtsema and T.J.B.M. Postma

knowledge and tacit (deeply rooted) knowledge and is often generated in organisations through
projects (Nonaka and Takeuchi 1995; Leonard-Barton 1992).
All in all, we are interested to find governance factors, i.e. contracts and/or trust that influence
knowledge transfer of the partners cooperating in an innovation project. From extant literature
we know that the success of knowledge transfer depends on the ease of communication and
intimacy of the overall relationship between the source unit and the recipient unit. Others mention
the importance of common strategic intent and partner openness (Hamel 1991; Inkpen 2000).
Furthermore, context specific knowledge is difficult to diffuse because of inertness, stickiness
and ambiguity (Kogut and Zander 1992; Simonin 1999; Szulanski 1996; Von Hippel 2005).

Methodology
Research domain
Empirical studies in project-based fields vary from engineering and construction to filmmaking.
According to Sydow and Staber (2002) cooperative relationships based on projects are embed-
ded in a set of supportive general social and political institutions in their organisational field.
Therefore, the context of the industry, regulations within the industry (and country), and the way
of performing business have a large impact on the forming of cooperative structures between
parties within the project-based industry. To control for this we draw cases from one sector, i.e.
the construction industry. As stated in the introduction, the construction industry has been stated
to lag behind in the rate of innovation compared to other industries. The low rate of innovation
partly occurs because of a strong focus on cutting costs and the fragmented nature of the industry.
Another explanation is that innovation rate is measured mainly based on R&D expenditure and
patents, while in the construction industry many small and medium sized firms actually do not
have R&D departments and do not formally allocate specific financial means for innovation and
patent-development (Seaden and Manseau 2001). Winch (2003) mentions however that there is
no reliable evidence that construction has a lower rate of innovation compared to other industries.
Our focus is on development projects between independent firms (e.g. suppliers, contractors, R&D
institutes, universities, governmental institutes) in the Dutch construction industry. The Dutch con-
struction industry is currently price-based and geared to cutting costs and in such an environment
it becomes more difficult to develop strategies for transferring knowledge between parties in the
industry.
This study is based on a multi-case study design (Eisenhardt 1989; Hartley 1994; Yin 1994).
We started with a pilot study of six semi-structured face-to-face interviews within the Dutch
construction industry to find suitable development projects. All cases were interorganisational
development projects, which started off as either in-house innovations or academic research ideas.
For these projects no external client with specific requirements was present, although one case
received external funding from a supplier and EU support to develop their ideas. Furthermore,
all these development projects were performed separately from construction projects. From these
cases we collected secondary data of firm documents, cooperation documents and published
articles about the developed innovations. In total we held 41 in-depth semi-structured interviews
(of 1–3 hours duration) with the involved firms of the four case studies (Case A: 5 interviews; Case
B: 5 interviews; Case C: 9 interviews; Case D: 5 interviews, 11 interviews concerning construction
context and exploitation of the innovation and 6 pilot interviews). The number of interviews held
per case differed owing to the number of partners involved in the case studies. The case interviews
were held with the main representatives of the firms cooperating in the development projects.
Governance factors enabling knowledge transfer in interorganisational development projects 597

The other 11 interviews were held with members of the management of the firms cooperating in
the development projects (these members were indirectly involved in the development projects),
and academics who had been studying some of these development projects longitudinally. Topics
discussed during the interviews were: the innovation process, the parties involved, the structure
and governance mechanisms of the cooperation and the transfer of knowledge in the network.
The data of the cases was taped, transcribed and validated through feedback and respondent
validation. The qualitative data were coded and labelled according to qualitative analysis methods
(Locke 2001; Strauss and Corbin 1997). The case study is conducted in two phases. In phase one,
within-case data analysis was performed and in phase two, a cross-case analysis was applied.
Below the cases are described in more detail (see also Table 1). In the description of the cases we
distinguish different phases of innovation projects (Cleland and Ireland 2002). These phases are
exploration (including conceptual and testing phase) and exploitation (prototyping and market
introduction phase).

Case A: Underwater concrete

A medium sized contractor company initiated and funded the development of a method and tools
for pouring underwater concrete (in-house innovation). This method improved the quality of
underwater concrete in terms of hardness and smoothness. Several independent R&D institutes
and suppliers on a contract basis tested the innovation. These suppliers were diving companies
(for checking the process and cleaning the underwater surface), concrete companies (for creating

Table 1. Characteristics of the case studies.

A: Underwater B: Concrete C: New floor

Cases concrete substance concept D: 3-D calculation

Innovation Product and method Product (formulae) Product and concept Product and method
and method
Partners Contractor, suppliers Contractor, Consultancy Contractor
involved (3) and R&D supplier (1) firm, suppliers (subsidiaries, 2),
institutes (2) (>5), R&D architect firm and
institutes and university
universities (3),
Contractor (1)
Governance Contract based Trust based Contract; Trust; Contract–Trust
mechanism Contract–Trust based
based
Knowledge Partner firms learned Limited transfer Limited transfer Transfer to partner
transfer to how to develop to partner firms to partner firms firms is high
partner firms product and (too specific Knowledge Knowledge
method and knowledge) stayed with internalised in
improved it Knowledge individuals in the partner firms
Win–lose context stayed with exploration phase Partner firms
Knowledge representatives In exploitation learned together
not shared of firms involved phase knowledge to cooperate,
willingly but in project about the market, divide tasks and
learned through production implement the
experience process and innovation in
future ideas was their firms
transferred more
easily
598 P.M. Bosch-Sijtsema and T.J.B.M. Postma

the concrete formulae) and concrete pumping companies (for pouring the concrete in the right
way). The main issue here with respect to knowledge transfer to the partner firms is the negative
effects of knowledge spillover.

Case B: Concrete development method

A large consortium of contractor firms and a concrete supplier initiated innovation B. The
innovation concerned the development of a new method based on existing technologies. The
partners worked on a fully trust-based manner without any written agreements, and the project
was funded equally by both firms. The project created knowledge about self-compacting concrete
(a new formulae was tested that could be shuttered more easily), in tunnel constructions for res-
idential houses, in a real life project. Knowledge transfer from the initiating firm to the partner
firm (supplier) is, however, limited. Because of its very specific character the knowledge stayed
with the involved persons and was not transferred to the rest of the supplier firm. The project
was put on hold after the concrete was tested in real-life. As a result of workload and economic
pressure the innovation process was not continued.

Case C: Flexible floor concept

The initiating firm was a consultancy firm for the construction industry that wanted to develop
flexible buildings. The innovation involved the development of a flexible floor in which installation
parts could be placed and removed more easily. The idea boiled down to separating installation
parts (e.g. electricity, water) from architectural parts. Project C was partially financed by EU
funding and only in the early stages by a supplier. In Case C, different parties were involved in
different phases of the development project. In the exploration phase, universities, R&D institutes
and the initiating firm were developing the concept. During the exploitation phase (prototyping and
quality tests of the prototypes) prototyping and testing phase suppliers (steel and concrete), R&D
institutes (for performing tests) and a contractor cooperated with the initiating firm (supplier–
customer contracts). In the exploitation (market introduction phase) phase a number of suppliers
cooperated with the initiating firm to help develop, build and exploit the floor. In the exploration
phase there was limited knowledge transfer; however in later exploitation stages (especially the
market introduction phase), the knowledge transfer to the partners enhanced.

Case D: Three-dimensional calculation and drawing method

The innovation project was a strategic alliance between an architectural firm and two largely
independent units (a selling and knowledge centre) of the same holding (contractor) company in
the construction industry and a university partner. The top management of the holding firm initiated
and funded the innovation. The innovation helped to divide the whole construction process into
small steps until the whole construction project (all separate parts) is negotiated and drawn (in
a 3D picture on a computer). This new process requires a close cooperation between the parties
involved in construction projects and resulted in a high extent of knowledge transfer to partner
firms and shared learning.

Coordination and knowledge transfer

In this section, we discuss the influence of governance mechanisms for knowledge transfer in
interorganisational development projects in the construction industry. The findings are presented
in Table 2.
Governance factors enabling knowledge transfer in interorganisational development projects 599

Table 2. Knowledge transfer related to governance mechanisms.

Trust–Contract
Fully-contract Fully-trust based combination
Types of based (Case A and C (Case B and C (Case D and C based
governance testing phase) conceptual phase) exploitation phase)

Knowledge transfer Need-to-know basis Brainstorm sessions Discussion groups

(KT) per type of (explicit knowledge
cooperation about methods,
technology, material,
safety) Learning-by-
doing
and discussions.
Intranet KT stayed
with individuals and
only about project
(mainly explicit about
technology, material,
methods) Learning by
doing (by prototypes
and tests in life settings)
First mainly
explicit (processes,
technology, how
to implement and
cooperate) KT, later
also tacit (culture
and routines change)
Development of trust
Learning by doing

Table 3. Governance mechanism related to knowledge transfer per partner firm Case A.

Firms in the Participation in Governance Knowledge transfer to Internalisation of

case study A phase of project mechanism representative of firm knowledge to firm

Contractor Whole project Fully contract New knowledge of Limited, but specific
based product/method: knowledge on
technological diving and testing
knowledge (safety issues could not
and material issues) be transferred (too
Learning to apply specific)
the product in
real-life projects
Suppliers Prototyping; Fully contract Experience based Yes, methods and
market – based transfer of methods; application of
introduction technological product were learned
phase knowledge; Suppliers developed
developed new their own version of
knowledge the product
R&D Conceptual Fully contract Awareness of method (only tested safety
institute phase based and product and issues)
safety issues

From the case studies, we found that three types of governance mechanisms were applied: (1)
a fully contract-based relationship (Case A and prototyping and testing phase of Case C), (2)
fully trust-based relationship (Case B and conceptual (exploration) phase of Case C), and (3) a
combination of contract and mutual trust (Case D and market introduction phase of C). Below we
discuss these types in more detail.

Fully contract-based project governance

A fully contract-based governance mechanism refers to cooperation between independent com-
panies, which is only based on extensive contracts. Case A (see Table 3), and the testing phase
600 P.M. Bosch-Sijtsema and T.J.B.M. Postma

of Case C applied contracts as a governance mechanism in their interorganisational project. In

both cases the partners were selected on price competition and the contracts clearly described
responsibilities, tasks, possible problems and time lines. Although the partners relied upon the
deliverance of the work contracted for, there was little trust for sharing knowledge. Knowledge
(explicit) was only transferred on a need-to-know basis about the content of the task and work.
Furthermore, in Case A, firms learned through learning-by-doing real life projects. In Case A, the
partner learned and improved the innovation developed, and started to develop and market the
innovation as a full concept for customers. The initial contractor pulled back from the market in
this field. One manager of the contractor firm mentioned:
When the patent ended, the diving companies had to some extent copied the product. We always
needed them to check our work, so they knew the product and method. Now they put to the market
a combination with both the underwater concrete and the diving service as a full package and for
half the price. We had a much higher price because it was not our core business and we did not
have a fixed team to do the work. (Contractor A)
Firms participating in CaseA developed a lack of trust, or even distrust and this distrust increased
rivalry between the firms on knowledge. Within Case A and the testing phase of Case C, firms
cooperated for optimisation of their own performance and determining specific responsibilities
instead of diffusing knowledge between the participating firms. In these cases, the partners had
conflicting objectives and a win/lose mentality. The contract horizon was short term and there was
little intention to transfer knowledge towards the contracted firms. In Case C, the project could
not live up to the requirements stated in a contract with one of their suppliers for prototypes and
this led to a situation of distrust between the supplier and the initiating firm of Case C.

An example from Case C:

At a certain point in time the supplier estimated that the cooperation did not live up to their expectations
and they decided to decrease their support. The project manager has also tried to use a competitive
supplier for a prototype and this has had an even more negative effect on the relationship. (Supplier C)

Fully trust-based project governance

In the fully trust-based relationship, trust substitutes for contract. These relationships were fully
based on mutual trust and no contract was written between the firms involved. In Case B and in the
conceptual phase of Case C, fully trust-based mechanisms were applied in the interorganisational
project. In Case B (see Table 4), the relationship was based on mutual (intentional-based) trust in
which the parties were responsible (and paid equally) for a part of the project. Partners were open
in sharing information about the project, but little information outside the project was discussed.
Furthermore, the partners discussed the potential failures, risks and mutual expectations in detail
before the project started. In Case C, during the conceptual phase, the partner relationships were
based on personal relationships (based on previous experiences) and on mutual benefit. The
relationships were fully governed by mutual (competence and intentional-based) trust. In both
cases, the partner firms viewed participation in the projects as beneficial for knowledge exchange
and development of new ideas that could in the future be lucrative to their own firm. The firms
saw their participation as an investment for the future.
In these relationships, knowledge was transferred through discussions (Case B) and brainstorm
sessions (conceptual phase of Case C). This knowledge was mainly explicit and about the con-
tent of the work. During the cooperation, experience was developed (learning-by-doing) in real
life projects (and test projects). Although the knowledge was assimilated, it was not adopted
Governance factors enabling knowledge transfer in interorganisational development projects 601

Table 4. Governance mechanism related to knowledge transfer per partner firm Case B.

Firms in the Participation in Governance Knowledge transfer to Internalisation of

case study B phase of project mechanism representative of firm knowledge to firm

Contractor Conceptual and Fully trust Technical knowledge No, knowledge not
testing about formulae, internalised in firm
application and Knowledge transfer
testing in real-life not formalised,
projects the project had
a low priority,
few resources and
organisational
changes in the firms
occurred influencing
the outcome of the
project
Supplier Conceptual and Fully trust Technical knowledge No, knowledge not
testing about formulae, internalised in firm
application and Knowledge transfer
testing in real-life not formalised,
projects Knowledge the project had
about market a low priority,
few resources and
organisational
changes in the firms
occurred influencing
the outcome of the
project

nor transformed by the participating firms and it remained with the individual contact persons.
Members of Case B mentioned in a joint discussion the following:

We were supposed to write a report on our cooperation, but this has not yet happened because of big
organizational changes. On the one hand this is bad, but we did have an oral evaluation, but not with
the whole participating teams. I did discuss this evaluation in my firm. (Contractor B)
This is very typical for the kind of project we work in, it is low profile and we only focus on the result.
(Supplier B1)
We need more experience and knowledge as well as organizational guidance to make the next step
for developing this concept in the firm. (Supplier B2)

Knowledge was not internalised by the participating firms. Case B indicates in detail the partner’s
mutual expectations and goals, but knowledge transfer was not formalised. The conceptual phase
of Case C shows that the cooperation was based on trust, but no clear agreements on goals, benefits,
ownership or knowledge transfer were made (see the following statement of Case C supplier).

The cooperation was all charity[:] nothing was described. If I would have calculated my investment
[then] it would be around [1.5] years of salary. I had expected to gain some financial support from the
turnover of the product, but I liked the work. We just launched the project, without making agreements
or discussing the expectations of the firms. (Supplier C)
602 P.M. Bosch-Sijtsema and T.J.B.M. Postma

Other factors that influenced the outcome of the projects were the fact that there was little financial
support for the development (Cases B and C), the project had a short-term horizon and the
participating firms perceived the innovation as of low strategic value or purpose for their firm
(Cases B and C). For Case B this implied that the project was disbanded early and for Case C,
several partners pulled out of the project owing to the lack of agreement on expectations and
financial support.

Combined contract–trust project governance

In the combined relationship, trust and contract complement each other as governance mecha-
nisms. These innovation projects (Case D and exploitation phase of Case C) had a longer-term
relationship in which trust was built over time. The contract can be seen as a sign of commitment
and a tool for coordination in this case. In the exploitation phase of Case C (see Table 5), the project

Table 5. Governance mechanism related to knowledge transfer per partner firm Case C.

Firms in the Participation in Governance Knowledge transfer to Internalisation of

case study C phase of project mechanism representative of firm knowledge to firm

Consultancy Whole project Several types Owner of whole Yes, they continue to
firm depending on project, learned develop the product
project phase about material, and methods
and partner safety issues,
manufacturing
issues, market issues
and application in
real-life
Supplier Conceptual Fully trust Knowledge sharing of No, knowledge stays
conceptual phase new ideas results with the individual
phase in new product and representative of the
method Combining firm
expertise
University Conceptual Fully trust Knowledge sharing of No, knowledge stays
partners phase new ideas results with the individual
in new product and (for publications and
method Combining research)
expertise
Contractor Testing/proto- Fully contract New applications of No, unsatisfactory
typing their material results. Pulled out
phase because of distrust
R&D Testing/proto- Fully contract Awareness of new (Only tested on safety
institutes typing products and issues)
phase methods
Supplier– Market Contract and New technology on Yes, next to developing
market introduction trust product, method the product they
intro- phase and constructing started new projects
duction the project Market with the consultant
phase knowledge and firm to innovate
cooperation on more.
innovation in
other projects with
initiator
Governance factors enabling knowledge transfer in interorganisational development projects 603

Table 6. Governance mechanism related to knowledge transfer per partner firm Case D.

Firms in the Participation in Governance Knowledge transfer to Internalisation of

case study D phase of project mechanism representative of firm knowledge to firm

Contractor Whole project Contract and Combined skills and Yes, partnership skills,
trust expertise, learned implementation of
partnership skills, innovation skills
division of tasks and
implementation of
innovations in their
own firm
Architect Whole project Contract and Combined skills and Yes, partnership skills,
firm trust expertise, learned implementation of
partnership skills, innovation skills and
division of tasks new way of thinking
and implementation about construction
of innovations in and innovation
their own firm, throughout whole
adjusted company firm
way of working
and thinking
to contractor’s
approach
University Conceptual Contract and combination of skills (Role was more an
phase trust observing role)

applied a combined contract–trust mechanism. In Case C, the partners started with initial trust
and the development of a contract for certain activities. Over time, trust grew as a result of good
experiences between those involved and the partnership developed other activities and ideas for
continuation based mainly on relational mechanisms. The involved partners (in the exploitation
phase) were very open to new knowledge and transparent towards their partners.
In Case D (see Table 6), the relationship between the firms was transparent and open in order
to develop new knowledge and solve conflicts. The partners cooperating in Case D had good
experience of working together from previous construction projects and they shared similar ideas.
For the innovation project, the partners in Case D designed a contract in order to initially settle
several cooperation principles as well as clarifications about the plan, goals, task division, activities
needed as well as ownership of products. The participants mentioned that the contract has been
used occasionally in order to clarify aspects on how to deal with specific matters.

If we had not clarified these matters in a cooperative contract it would have taken a long time to
discuss. (Contractor D2)

Furthermore, the strategic value of innovating was rather high (especially in Case D) for survival
in the construction industry. Both the participating partners of Cases C and D mentioned that it
took time and effort to develop a trust-based relationship. A comment of a respondent of Case D:

In this partnership we have been struggling and are still struggling with the whole process about
openness and trust. Openness and trust are necessary with cooperation, but are still rather difficult
for human beings. You have to trust your partner, and that also counts within our project team. You
604 P.M. Bosch-Sijtsema and T.J.B.M. Postma

have to trust the other partner so that s/he does what s/he is supposed to do and you should be able to
confront them about this. The other side of the responsibility is that you have to comment on each other
when things go wrong. Team creation, openness and trust are still aspects that need daily attention.
(Contractor D1)

Participants in Case D mentioned that they had jointly resolved conflicts and problems and this
deepened their relationship. In this case, cognitive conflict increased trust. The knowledge trans-
ferred in the relationships based on contracts and mutual trust was not only content knowledge,
but also knowledge about implementation aspects (mainly Case D) and learning how to cooperate.
Furthermore, besides explicit knowledge, also tacit knowledge was transferred and internalised
within the firms. In Case D, the architectural firm changed its culture in order to adopt and adjust
the developed innovation and knowledge and this had a large impact on the perspective of the
employees about the construction industry in general. The respondent mentioned:

Our partner is delving [into] several products (in the form of methods) to[for] our firm, [. T]they relate
to the changes our company has been going through. By offering several products, our thinking in
our firm has changed considerably. When we started with this project, we had a different culture in
our firm. One and a half year[s] ago we have[delete have] changed our strategy and thinking in terms
of products. This increased visibility and clarity for all employees but it also implied that we were
thrown back upon our own resources. (Architect D)

In Case C, the longer-term relationships in the exploitation phase turned into a sounding board
for future ideas and developments (see statement below). One of the interviewees commented:

The technical knowledge is fully from the initiating firm, but we learned a part of the knowledge from
both the initiating firm but also from other sources. First mainly technical knowledge was exchanged,
about how to do things. After that, this has changed to a ‘sounding board’ relationship in which we
exchange information about developments in the market, reactions on the product and other aspects
we work on. Furthermore, the initiating firm contact person has collected a group of people to look
at new developments, and I am part of this group. (Supplier C)

Discussion
From the analysis above we infer that knowledge transfer towards participating firms cooperating
in a project-based environment is positively influenced when partners govern their cooperation by
using both mutual trust and contract complementary. In two of the cases this combinative approach
is successful, which supports recent empirical research (Faems, Janssens and van Looy 2007; Klein
Woolthuis, Hillebrand, and Nooteboom 2005; Poppo and Zenger 2002). The cases discussed above
show, besides differences in governance mechanisms and intent, a difference in expectation of
their cooperation. The fully contract-based partnerships showed low intent and expectations to
learn from their partner firms. The low intent and low expectations result in extensive contracts
and low trust towards the partners, to control relational risks of opportunism (Nooteboom 1999).
This confirms research results by Klein Woolthuis, Hillebrand, and Nooteboom (2005), who found
that a full contract partnership is not always in line with research performed on transaction costs,
which states that contracts form an optimal safeguard for a relationship to achieve efficient out-
comes (Williamson 1985). In Case A, the full contract tried to protect partners from opportunism,
but rivalry, distrust and knowledge spillover occurred in the end. This coincides with interorgan-
isational cooperation literature which indicates that extensive contracts can hinder information
exchange since parties are afraid to disclose information or knowledge (Hamel 1991) and focus
Governance factors enabling knowledge transfer in interorganisational development projects 605

on a strategy in which they optimise the work from their own firm, instead of creating win–win
situations for all participating firms. In situations in which learning and innovation are important,
extensive and detailed, legal contracts with procedures for monitoring and control can be highly
counter productive, since it can block the required exploration through trial and error especially
in small firms.
The fully trust-based partnerships showed a rather high expectation on exchanging knowledge
from their partnership. However, knowledge transfer (in Cases B and C) was not clearly discussed,
defined or formalised. This is in line with the findings of Faems, Janssens, and van Looy (2007),
who state that innovation projects could work based on relational contracts, but for interorgani-
sational knowledge transfer it is important that detailed agreements are defined. Even though the
representatives of the firms in the projects learned from the cooperation, they had no routines,
structures or agreements that could support knowledge transfer towards the firms (internalising
knowledge). This could be due to a lack of absorptive capacity of the firms involved (Cohen and
Levinthal 1990).
The cases, in which both contract and trust mechanisms were applied, showed that the firms
involved had the intent and expectation to develop a long-term partnership in order to learn from
their partners and in the long term survive in the market. The effectiveness of the combination
of governance mechanisms, in which trust and contract go hand in hand, for knowledge transfer
and performance is also suggested by Poppo and Zenger (2002), Klein Woolthuis, Hillebrand,
and Nooteboom (2005) and Faems, Janssens, and van Looy (2007). In the Cases C and D it was
clear that knowledge was transferred and internalised in the cooperating organisations, instead
of only between the participating individuals. In case of a trusting atmosphere, the contract can
have a different meaning, instead of being a safeguard for opportunism: the contract can be an
expression of the trust built between the partners. As trust develops over time the opportunities for
knowledge transfer increase (Inkpen and Tsang 2005). In both Cases C and D pre-trust for setting
up the contractual agreement was present as well as trust developed over time and the contract
was mainly used as clarification and expression for trust (cf. Uzzi 1997).

Conclusion
Several studies discuss the difficulties of projects and transfer of knowledge from the project
towards the firm (Dubois and Gadde 2002; Gann and Salter 2000; Taylor and Levitt 2005; Winch
1998). This study presents insights in governance mechanisms for interorganisational devel-
opment projects for knowledge transfer towards the involved firms. We found that knowledge
transfer towards participating firms cooperating in an interorganisational development project is
positively influenced when partners govern their cooperation by using both mutual trust and con-
tract complementary. It underscores the relevance of the recent findings that trust and contracts
need not be opposing alternatives, but complement each other (Klein Woolthuis, Hillebrand, and
Nooteboom 2005; Poppo and Zenger 2002). This means that trust relationships are assumed to add
to contracting relationships and through this learning and innovation can be enhanced. Moreover,
trust development between partners enhances knowledge transfer (Inkpen and Tsang 2005) and
may deal with barriers to knowledge transfer (cf. Szulanski 2003).
We are aware of the fact that generalisations are difficult to make based on four cases in one
industry. In future research the relationship between governance mechanisms and knowledge
transfer needs further investigation, since several other aspects affect this relationship (e.g. dura-
tion, physical location, national and cultural aspects). Furthermore, international comparisons
might provide a different perspective on the findings of this research.
606 P.M. Bosch-Sijtsema and T.J.B.M. Postma

Acknowledgements
The authors are grateful to the anonymous reviewers for their insightful and useful comments.

Notes on contributors
Petra M. Bosch-Sijtsema is a visiting scholar at Stanford University, USA at the Project Based Learning Laboratory, and
a researcher at Aalto University School of Science and Technology, Laboratory of Work Psychology and Leadership in
Finland. She received her licentiate from Lund University (Sweden) and her PhD from the University of Groningen (the
Netherlands) in Management and Organisation. Her research focuses on innovation, knowledge creation and transfer in
project-based environments and virtual teams.

Theo J.B.M. Postma is an associate professor of strategic management at the University of Groningen, Faculty of Economics
and Business in the Netherlands. He received his PhD in Business Economics from the University of Groningen in 1989.
His research interests involve strategy, scenario development, strategic learning in and between organisations. His current
research interests include also corporate governance, innovation and networks.

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