J PROD INNOV MANAG 2009;26:58–70

r 2009 Product Development & Management Association

Cooperative Innovation Projects: Capabilities and Governance

Mechanisms

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

This paper is concerned with how firms in a project-based industry cooperate in

technological innovation projects in the construction industry. The main focus of the
paper is on the sharing of capabilities in cooperative innovation projects and how
these cooperations are governed. A knowledge-based perspective is applied, and four
cooperative innovation projects in the construction industry are compared. Based on
the case studies, a set of propositions is defined. First, a cooperation aimed at a
mutual strategic benefit in mutually gaining access to the knowledge bases of the
involved firms, while maintaining their own differentiated knowledge base, can re-
sult in more stable and long term relationships with mutual trust between the co-
operating firms. Second, in a cooperation aimed at a mutual strategic benefit in
mutually gaining access to the knowledge bases of the involved firms, partners not
only gain access to each other’s technological capabilities but also develop and share
knowledge about organizational aspects and market situations and gain knowledge
about the way of working of the partner firm. Third, in a cooperation aimed at
mutual strategic benefit in mutually gaining access to the knowledge bases of the
involved firms, noncodifiability of the capabilities is conditional to create a win–win
situation. And fourth, cooperation aimed at a mutual strategic benefit in mutually
gaining access to the knowledge bases of the involved firms is based on mutual
competence and intentional trust as its main governance mechanism, whereas con-
tracting between market parties aimed at knowledge–output transactions is repre-
sented by limited trust and arms’ length (contractual) relationships as its main
governance mechanism.

Introduction cooperation with other firms in technological innova-

tion projects. A PBF creates and recreates new orga-

T
he concern in this paper is how project-based
firms (PBFs) deal with strategic issues with
respect to sharing capabilities and the kind
of governance mechanisms PBFs apply for to gain
Address correspondence to: Petra M. Bosch-Sijtsema, Helsinki
University of Technology, Faculty of Industrial Engineering and Man-
agement, Laboratory of Work Psychology and Leadership, Otanie-
mentie 14, 02015 TKK Espoo, Finland. Tel.: þ 358-50-9295890.
E-mail: Petra.Bosch@petrabosch.com.
 We would like to thank the editor Anthony Di Benedetto and two
anonymous reviewers for their constructive comments and support on
two earlier versions of the paper. Their comments contributed to con-
siderable improvements.
nizational structures around the demands of each
project or each major customer. However, it lacks
the strengths of more traditional functional forms in
performing routine tasks, achieving economies of
scale, and coordinating cross-project resources
(Hobday, 2000). Examples of project-based industries
are the engineering and construction industries
(Blindenbach-Driessen and Van Den Ende, 2006;
Keegan and Turner, 2002). Within PBFs, we may dis-
tinguish between two types of projects. Business pro-
jects are projects executed by order of a specific client
(Blindenbach-Driessen and Van Den Ende, 2006),
COOPERATIVE INNOVATION PROJECTS
whereas development (innovation) projects aim at in-
novation and take place separately from business pro-
jects. Few studies investigate innovation projects
performed in cooperation with other firms in pro-
ject-based industries (cf. Gann and Salter, 2000). Co-
operation can be organized in several different forms
(e.g., subcontracting, consortia, a strategic alliance,
joint venture, innovation network) (Tidd, Bessant,
and Pavitt, 2002). A main question concerning these
multipartner projects is how to develop new knowl-
edge or how to transfer it without running the risk of
one-sided advantages by one of the partners involved.
The aim of this paper is to study in cooperative in-
novation projects the knowledge capabilities and the
employed governance mechanisms to deal with the
aforementioned risk to arrive at a set of propositions.
Several authors have argued for the pursuit of coop-
erative strategies as a means for creating knowledge
or gaining access to knowledge and skills outside
the boundaries of the firm (Hamel, 1991; Inkpen
and Crossan, 1995; Kogut, 1988; Lane and Lubatkin,
1998; Larsson et al., 1998; Wathne, Roos, and von
Krogh, 1996). This literature refers to the relevance of
organizational and interorganizational learning and
the knowledge-based view in this context. Although
innovation can be stimulated by cooperation, several
studies mention that learning and development of
knowledge can be problematic because of, among
other reasons, organizational and cultural differences
and a competition to learn and the fear of firms to
disclose knowledge (e.g., Hamel, 1991). Cooperation
between firms has been researched extensively in the
alliance and joint venture literature in which gover-
nance between cooperating firms (Gerwin and Ferris,
BIOGRAPHICAL SKETCHES
Dr. Petra M. Bosch-Sijtsema is researcher at Helsinki University of
Technology on the Faculty of Industrial Engineering and Manage-
ment in the Laboratory of Work Psychology and Leadership in
Finland and visiting scholar at Stanford University in California.
She received her licentiate from Lund University in Sweden and her
Ph.D. from the University of Groningen in The Netherlands in
management and organization. Her research focuses on innovation,
knowledge creation, and transfer in project-based environments and
virtual teams.
Dr. Theo J. B. M. Postma is associate professor of strategic man-
agement at the University of Groningen on the Faculty of Man-
agement and Organization in The Netherlands. He received his
Ph.D. in business economics from the University of Groningen in
1989. His research interests involve strategy, scenario development,
and strategic learning in and between organizations. His current
research interests include also corporate governance, innovation,
and networks.
J PROD INNOV MANAG 59
2009;26:58–70
2004), and learning between alliance firms (Child,
Faulkner, and Tallman, 2005) is discussed for long-
term cooperative structures. Few studies, however,
discuss learning and knowledge transfer in develop-
ment (innovation) projects in the context of PBFs,
which can have different lengths of duration. This
kind of cooperative projects will therefore be specifi-
cally the focus of this study.
The construction industry is an example of a pro-
ject-based industry (PBI), in which project manage-
ment and control are important instruments (Bresnen
and Marshall, 2000; Naoum, 2003; Prencipe and Tell,
2001; Pries and Janszen, 1995). The construction in-
dustry requires a unique combination of labor and
materials inputs, performed and coordinated on site
(Eccles, 1981, p. 137), and is based on a stable rela-
tionship between a general contractor and special
trade subcontractors. The contracting mode of the
construction industry is defined as a quasifirm (ibid.),
which is typically located in between markets and hi-
erarchies (Hennart, 1993; Williamson, 1975). Innova-
tion performance of the construction industry in
terms of productivity, quality, and product function-
ality has been relatively low in comparison with other
industries (Winch, 1998). The low level of innovation
performance is based on a number of aspects: (1) the
fragmented nature of the industry; (2) the uniqueness
of the construction as a product; (3) the division be-
tween design and construction; and (4) the role of
consultants and the procurement methods for receiv-
ing assignments (Naoum, 2003). The construction in-
dustry consists of a large number of (specialized)
small and medium-sized firms. It becomes difficult
to permeate information and knowledge about prod-
uct innovations to all these firms. Forms of collabo-
rations (especially partnering, which is a longer-term
alliance between contractors and clients in the con-
struction industry) in the construction industry have
been seen as ways of dealing with the fragmentation
and lack of integration that have influenced attempts
to improve project performance over the years (Bres-
nen and Marshall, 2000). Bresnen and Marshall
(2000) reviewed literature on partnering and stated
that this research shows that, for example, cost, time,
quality, buildability, and fitness for purpose can be
dramatically improved if participants adopt more col-
laborative ways of working. However, partnering as
discussed in literature mainly focuses on business
projects in which clients and contractors cooperate;
partnering is hardly discussed for innovation projects
with several cooperating parties. The focus of the
60 J PROD INNOV MANAG
2009;26:58–70
present study is on cooperative innovation projects
in which suppliers, customers, research and develop-
ment (R&D) institutes, universities and contractors
cooperate.
The often applied project control systems around
which the PBF operates serve to stifle innovation
(Keegan and Turner, 2002). A number of authors
(e.g., Seaden and Manseau, 2001; Winch, 1998) have
discussed that it is difficult to measure innovation in
this industry based on traditional measurements like
R&D activities and patents, since the construction
industry mainly focuses on organizational processes,
contracting arrangements, and assembly methods
(Seaden and Manseau, 2001). Furthermore, in the
measurements of innovation in the construction
sector, architectural and engineering firms are usually
not included (Winch, 2003), but they do, however,
score relatively high on innovation (Waalkens, 2006).
This might lead to an underestimation of innovation
potential in the construction industry. Therefore, in
this paper, a more in-depth qualitative approach is
adopted from the point of view of innovation projects.
New ideas can either (1) be adopted by firms and im-
plemented on projects (top down) or (2) result from
problem solving on projects and be learned by firms
(bottom up) (Brady and Davis, 2005; Slaughter, 1993;
Winch, 1998). Usually less attention is being paid to
specific projects designed to create a new idea or
product in cooperation with other firms and R&D
institutes and universities (i.e., innovation projects).
In the construction sector it is a relatively new phe-
nomenon to join other organizations to develop new
knowledge that can be applied by the involved firms
or even applied in the whole industry. This type of
cooperation can enhance innovative performance of
the industry.
The paper is structured as follows. First, the knowl-
edge-based view, capabilities, and governance of
cooperative projects are discussed. Then the method-
ology of the study is presented, which is followed by
descriptions of four case studies of cooperative inno-
vation projects in the Dutch construction industry.
After this, the cases are compared and propositions
are defined; the final section concludes.
Capabilities and Governance
To investigate cooperative innovation projects in the
construction industry, a knowledge-based perspective
is applied. In this perspective, knowledge is perceived
P. M. BOSCH-SIJTSEMA AND T. J. B. M. POSTMA
as the strategically most important resource of the
firm (Grant, 1996). Knowledge resources and capa-
bilities are developed over time through the execution
of projects. Research on alliances indicates that
alliances and joint ventures provide firms access to
the skills and capabilities of their partners (Hamel,
1991; Inkpen and Crossan, 1995; Kogut, 1988). Most
research on knowledge sharing in alliances stresses
learning (acquiring knowledge) of alliance partners.
Grant and Baden-Fuller (2004), however, focused on
knowledge application, in which firms gain access to
the stock of knowledge of its partner firms to exploit
complementarities but with the intention to maintain
their base of specialized knowledge.
Partner firms often aim at extending their set of
distinctive technological capabilities (Colombo,
2003). These capabilities can be cospecialized or com-
plementary skills for the project (Doz and Hamel,
1998; Gerwin and Ferris, 2004). However, studies
show that significant differences in a partner’s knowl-
edge base usually impede learning (Simonin, 1999). A
cooperative innovation project or an alliance can also
focus on acquiring similar technical skills (Pisano and
Teece, 1988), in which each partner has the knowledge
necessary to perform the work alone. The reason for
cooperation in this respect is to limit risks in devel-
opment or to establish a new industry wide standard
(Gerwin and Ferris, 2004). When firms have similar
capabilities, mutual learning will be easier, as firms
are better able to absorb each other’s knowledge
(Colombo, 2003). However, too many overlapping
knowledge bases promote convergence of partner’s
capabilities (Mowery, Oxley, and Silverman, 1996),
and the cooperation can cease to exist since there is no
real need for accessibility when capabilities overlap
(Grant and Baden-Fuller, 2004). Although alliance
literature on knowledge mainly focuses on longer-
term cooperation, the issue of gaining access to or
acquiring knowledge is also applicable for relatively
shorter-term cooperative innovative projects. Knowl-
edge transfer is defined as the process through which
one unit is affected by the experience of another
(Argote and Ingram, 2000). Knowledge transfer can
be perceived as explicit (codified) and tacit (deeply
rooted) knowledge (Nonaka and Takeuchi, 1995).
Few studies apply a knowledge-based view for in-
vestigating cooperative innovation projects in project-
based industries. Due to the focus on project work
(implying result orientation) in these industries, firms
are inclined to mainly concentrate on project
management and control to increase efficiency and
COOPERATIVE INNOVATION PROJECTS
decrease costs, and innovation is limited or inhibited
in project-based firms (Gann and Salter, 2000; Keegan
and Turner, 2002; Prencipe and Tell, 2001).
Governance Mechanisms
According to Nooteboom (1999), governance in co-
operative relationships deals with controlling rela-
tional risk due to opportunism and dependency of
firms. Das and Teng (2001) characterized relational
risk as the probability and consequences of not having
a satisfactory cooperation. Both informal means of
governance (e.g., trust and reputation) and formal in-
struments of control (e.g., detailed contracts and
procedures for monitoring) can be relevant for inno-
vation and learning (Nooteboom, 2000). In market
situations, participating firms negotiate more or less
detailed contracts to protect against opportunistic be-
havior (Williamson, 1975). Following Mayer, Davis,
and Schoorman (1995, p. 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.’’ The relevance of trust is that it econo-
mizes on the specification and monitoring of contracts
and that it stimulates cooperation (Nooteboom,
1999). Trust between cooperating firms means an or-
ganization having confidence in the reliability of other
organizations, regarding a given set of outcomes or
events. One trusts an organization with respect to cer-
tain behavior (Sydow, 1998). Lewicki, Tomlinson,
and Gillespie (2006) indicated that trust in this view
is regarded as a single superordinate factor, with cog-
nitive, affective, and behavioral intention subfactors.
Behavioral aspects of trust refer to the dynamics and
reciprocity of trust. The present analysis is restricted
to the well-known distinction between competence/
cognitive and intentional/affective trust (Child et al.,
2005; Lewicki et al., 2006). Competence trust relies on
trust in technical, cognitive, organizational, and com-
municative competencies, and intentional trust is
based on intentions toward a relationship, mainly in
refraining from opportunism (e.g., goodwill, affect,
and dedication; see, e.g., Klein-Woolthuis, Hillebrand,
and Nooteboom, 2005; Nooteboom, 1999, 2002).
Figure 1 presents the study’s conceptual model.
The focus of the research (Figure 1) is on investigating
knowledge transfer processes and governance mecha-
nisms employed in cooperative innovation projects in
J PROD INNOV MANAG 61
2009;26:58–70
Industry
Project based industry
Construction firms
Cooperative
Suppliers Innovation Project:
- Kind of capabilities
R&D/ Knowledge transfer - Governance
knowledge Institutes and creation mechanisms
(trust, contract)
Customers
Figure 1. Process View of a Cooperative Innovation Project in a
Project-Based Industry
the construction industry in which construction firms,
suppliers, customers, research institutes, and univer-
sities cooperate with the intent to develop a new
product or service. The following questions are inves-
tigated more in-depth:
1. What kind of knowledge capabilities are acquired
or gained access to by the cooperating partners,
and what are the consequences for the cooperation?
2. What kind of government mechanism is applied
within the cooperation?
Methodology
In this paper a comparative case-study analysis
(Eisenhardt, 1989) of four cases of cooperative inno-
vation projects in the Dutch construction industry is
applied. The Dutch government has taken interest in
innovation of the Dutch construction industry, in
which different partners like contractors, suppliers,
universities, and customers cooperate to develop a
new product or service. Besides the interest regarding
Dutch government, access to this industry was avail-
able, and therefore the Dutch construction industry
was chosen as this study’s field of investigation. Be-
fore investigating the case studies, six semistructured
interviews within the construction industry were held
to capture the current ideas and status of innovation
in this industry. Four case studies of technological
innovation projects that were performed in coopera-
tion with different firms (mainly contractors from the
construction industry in cooperation with suppliers or
researchers) were selected. The number of four cases is
related to Eisenhardt (1989), who stated that this
number of cases is minimally required for case
comparison. Furthermore, the availability and access
to cases of cooperative innovation projects in the Dutch
62 J PROD INNOV MANAG
2009;26:58–70
construction industry is rather difficult, because rela-
tively few initiatives are known in which firms cooper-
ate for innovation. Also, access is limited since many
organizations are afraid of information disclosure.
The cases involved a technological innovation in
either products or processes in the Dutch construction
industry. The amount of semistructured in-depth in-
terviews held was 35 (from one to three hours) with
involved parties of the four case studies (case Alpha,
5 interviews; case Beta, 5 interviews; case Gamma,
9 interviews; case Delta, 5 interviews; and 11 inter-
views concerning construction context and exploitation
of the investigated innovation projects). The number of
interviews held per case differed due to the number of
firms involved in the investigated innovation projects.
Items taken into account during the interviews were as
follows: (1) characteristics of the innovation; (2) the
firms involved; and (3) governance mechanisms of the
cooperation and knowledge flows (i.e., knowledge
creation and transfer between firms cooperating in
the innovation project).
The interviews were taped and transcribed, and
validation was received through feedback and respon-
dent validation. The qualitative data were coded and
labeled according to qualitative analysis methods
(Strauss and Corbin, 1997). For the codification,
several stages were applied iteratively throughout
the research (Locke, 2001). Incidents were sorted
into categories for comparison, and this labeling pro-
cess was to some extent influenced by the theoretical
framework on project organizations, innovation, and
the knowledge-based view. After a comparison of la-
bels and data incidents, the labels were renamed and
categorized into a number of groups: (1) aspects of the
innovation project and the involved firms; (2) capa-
bilities; and (3) governance mechanisms. Based on the
codification and categorization of individual cases,
cross-case analysis (Eisenhardt, 1989) was performed
to find patterns and differences between the cases. In
the following sections the four case studies are dis-
cussed separately.
Innovation Projects in the Dutch Construction
Industry
The four case studies are described briefly herein. Af-
ter a short description the cases are compared with
respect to the main issues of learning or accessing
knowledge capabilities and governance mechanisms
P. M. BOSCH-SIJTSEMA AND T. J. B. M. POSTMA
to observe and analyze the similarities and differences
between the case studies.
Cooperative Technological Innovation Projects
Case Alpha (Duration In-House Development
1–2 Years). Case Alpha started as an in-house devel-
opment project of a medium-sized contractor firm to
develop a method to pour underwater concrete. This
method improved the quality of this type of concrete
in terms of hardness and smoothness. The concept
was developed in-house. To test the developed
method, the initiating firm cooperated with diving
firms, concrete firms, and concrete pumping firms.
These partners had conflicting objectives and a win–
lose mentality. They cooperated on a short-term basis
and had price-based competition (see Hennart, 1993).
Furthermore, a number of tests were performed by
independent R&D institutes. The initiating firm (i.e.,
the contractor) received a patent for the method and
published several international papers about the
method in comparison with other existing methods.
The innovation project is now terminated.
Case Beta (Duration 1.5 Years). Case Beta is a
cooperative between the headquarters of a large con-
sortium of several contractor firms (i.e., initiating
firm) and a supplier of concrete. The project is con-
cerned with the development of new applications for
self-compacting concrete. This implies that the con-
tent of the concrete differs from others, as well as
the shuttering method for applying the concrete—
meaning that the concrete was self-compacting and
could be unshuttered securely (without any problems,
which was normally the case) the next day. The pro-
ject was terminated after the product was tested in a
real-life situation phase due to a lack of time and
financial means. The concrete supplier, however, con-
tinues exploring the possibilities to develop this appli-
cation for concrete.
Case Gamma (Duration Approximately 10 Years).
Gamma developed a floor concept (including methods
and products). The floor was designed in such a way
that installations (for water, electricity, telecommuni-
cation, ventilation, heating, and a sewer system) could
be exchanged without reconstructing the whole build-
ing. This increased the flexibility of changing the in-
terior architecture of houses and the sustainability
of buildings (in this case, residential houses). In Case
Gamma, different partners cooperated in the project
COOPERATIVE INNOVATION PROJECTS
in different development stages. The initiating firm
was a consultant firm in the construction industry.
For the development of the concept, the initiating
company worked together with universities and R&D
institutes. For testing and developing prototypes, the
initiating firm cooperated with manufacturers and
with contract research institutes. For the exploitation
(i.e., market introduction) and production of the
floor, the consultancy firm collaborated with a num-
ber of suppliers that were able to develop and con-
struct (parts of) the floor principle. The product is still
being improved.
Case Delta (Duration Approximately 5 Years). The
partners in the innovation project were an architect
firm and two largely independent organizations (a sell-
ing center and a knowledge center that initiated the
development) working within a medium-sized holding
company in the construction industry. Case Delta de-
veloped a three-dimensional (3D) modeling and calcu-
lation product and process, which changes the way of
working in a building project. With this system’s help,
the whole building process can be divided into small
steps until all separate parts are negotiated between the
different parties (e.g., architects, contractors, engi-
neers, installation companies), and then all parts are
visualized in a 3D picture. After a complete 3D draw-
ing is agreed on, the building is then constructed. This
new process requires a close cooperation among all
construction parties. Currently, the partnership is im-
plementing the innovation with the subsidiaries of the
holding company, and the architect firm is exploiting
parts of the technology on the market (they exploit 3D
modeling commercially to other clients).
Capabilities in Cooperative Innovation Projects
Based on the knowledge-based perspective, the capa-
bilities that were important for the cooperation are of
interest to this research. This section provides a dis-
cussion of the knowledge development and transfer
and questions if capabilities are acquired or accessed
by and from the cooperating partners as well as the
consequences this has for the cooperation.
Alpha. In the beginning the innovation was created
and developed by one contractor firm. This firm pub-
lished the developed knowledge in the form of patents
and publications in construction magazines. The con-
tractor firm needed the capabilities of diving compa-
nies for checking the process of pouring concrete
J PROD INNOV MANAG 63
2009;26:58–70
under water and cleaning the underwater surface
and of concrete companies for creating the concrete
formulae and concrete pump companies for pouring
the concrete in the right way to execute the innova-
tion. The partner firms all had expert knowledge
about pouring underwater concrete, although they
specialized in different areas. The contractor firm,
however, was dependent on the capabilities of the
other firms to construct the underwater concrete (it
was not their core competence). Over time the partner
firms learned and internalized the procedure through
experience in real-life construction projects, and they
improved the method and the concrete formulae.
Once the patent of the contractor firm expired, the
other firms started to sell the product and method as a
full concept and took over the market. The partners
cooperated on an ad hoc and competitive basis. The
partners eventually did not share knowledge openly
with each other.
Beta. In Case Beta, two firms cooperated in the
innovation project. The concrete supplier delivered
knowledge of concrete, experience, and test material
from their laboratory about the type of concrete. The
contractor firm delivered the initial idea, the real-life
project, and experience in coordinating construction
projects. The supplier reported laboratory tests, ex-
periences about concrete, and test results of the real-
life project. The partners also shared knowledge about
the market of both the contractor firm and the con-
crete firm. Furthermore, both parties discussed be-
forehand their expectations, possible risks, and
responsibilities of the project, and they evaluated the
project (content) and the cooperation after testing the
product. The partners were open in sharing informa-
tion about the project, but little information outside
the project was discussed.
Gamma. In developing the concept of the innova-
tion of Case Gamma, technological knowledge about
the raw material of the combination of concrete and
steel and installations and experience of different
firms was discussed; partners’ capabilities were in con-
struction material, construction market, and installa-
tion systems. The firms working on the concept were
motivated to develop a new concept and shared their
knowledge openly with each other. The concept was
developed and tested by suppliers and independent
research institutes according to quality and safety reg-
ulations. These firms shared only the needed knowl-
edge for testing. The production of the floor was
64 J PROD INNOV MANAG P. M. BOSCH-SIJTSEMA AND T. J. B. M. POSTMA
2009;26:58–70

performed by a number of suppliers who developed were price driven and contained clear expecta-
longer-term relationships with the consultancy firm tions, risks, and responsibilities of all involved parties.
(for not only innovation projects but also business
projects). These suppliers were able to develop and
Beta. In Case Beta, the cooperation between the
produce parts of the floor product (knowledge on steel
supplier and the contractor firm was based on mutual
and concrete). Furthermore, the suppliers had contact
trust (competence and intentional-based trust). Both
with the final customers and knew the construction
partners supported the specific project financially, but
market. The relationship between the suppliers and
this has not been formalized in a written contract
the initiating firm developed into a mutual trust and
(only in minutes of a meeting). The relationship was
sounding board relationship. The involved partners
project specific (i.e., for this innovation project only);
were very open to new knowledge and were transpar-
however, the partners cooperated in business projects,
ent toward their partners. The firms with whom more
and the partners had professional relationships with
long-term relationships were built shared the perspec-
other organizations as well on these topics. The par-
tive of the initiating firm to change aspects in the
ties explicitly discussed the risks and problems that
construction market.
could occur.

Delta. In the early phase of the innovation project

Delta, tasks were allocated between the parties, based
on the specific skills of the parties with respect to
knowledge in drawing 3D construction models, cal-
culation knowledge, and knowledge about the con-
struction industry and innovation processes. The
result of the project was a better understanding of
the activities and capabilities of each party. Knowl-
edge is exchanged about the process and how to ex-
ecute the innovation. The parties had different
perspectives, and they learned from each other’s
points of view and positions in the market. The part-
ners created and internalized knowledge about the
development of partnerships. This knowledge is not
stored but orally shared. The organizations (not only
the contact persons but also other members of the
organizations) are now fully involved in the develop-
ment and commercialization of the product and
knowledge about the system and methods has been
internalized in the partner’s firms. The relationship
between the firms was transparent and open to de-
velop new knowledge and to solve conflicts.
Governance Mechanisms
The focus of this paper is on two types of governance
between the firms participating in the innovation pro-
jects: (1) contractual relationships; and (2) trust-based
relationships (see Nooteboom, 2000). The four cases ap-
plied different governance mechanisms in their projects.
Alpha. The relationships between the initiating firm
and its partners were mainly contract based (supplier
–customer contracts) and short term. The contracts
Gamma. Case Gamma had different types of rela-
tionships in their cooperation. During the develop-
ment of the concept, the partner relationships were
based on personal relationships; they knew each other
from previous experiences/affiliations and shared a
mutual benefit for society, their own industry, or fu-
ture business. There was no contract, but the rela-
tionships were based on mutual (competence and
intentional) trust. Some partners dropped out and re-
gretted the fact that there was no explicit formulation
of expectations and results when the development
process toward commercialization seemed to take
too much time. When prototypes needed to be built
and tested, more formal relationships were estab-
lished, based on standard supplier–customer contracts
in which both parties agreed to participate on certain
conditions. In the exploitation phase (production and
introduction to market) the relationships between the
industrial partners and the leading firm were contract
based on a supplier–customer contract. Over time the
relationship between the parties grew into a more (in-
tentional) trust-based relationship, and they cooper-
ated on other activities as well. These other activities
were not contractually sealed. The cooperating parties
had no previous affiliation with each other, but they
had in the initial phase a similar perspective about
testing new products and ideas. The relationship de-
veloped into a (intentional) trust-based relationship
because of good experiences in working together. The
exploitation phase of the project consisted of long-
term relationships without a guaranteed workload in
both contract and trust-based forms. Most members
were motivated by intrinsic values of improving the
construction industry.
COOPERATIVE INNOVATION PROJECTS
Delta. In Case Delta the partners consisted of two
firms in a holding firm in the construction industry
and an architect firm. The holding had a strategic al-
liance with the architect company, in which a number
of principles have been described. The partnership
used the contract to create understanding about how
to deal with several issues. Between the two holding
companies no contract has been made, since both or-
ganizations have a common interest. All parties con-
tributed to develop a formal agreement to register
what they wanted to achieve with this cooperation in
one or two years. The relationship in the alliance has
been build gradually. Both firms have similar perspec-
tives about how the construction industry should
work and are willing to be transparent, open, and
trustful both in terms of competence and intentional
trust. The partners have worked within the alliance
for some time now. However, they stated that they
had to solve some arguments and conflicts while de-
veloping the concepts and prototypes of the innova-
tion project; the architect firm even reorganized its
organization to develop and execute the innovation.
Over time they grew closer together and learned to
understand each other better.
Knowledge Capabilities and Governance
In this section the four cases on knowledge capa-
bilities and governance mechanisms used in the
innovation projects are compared. Table 1 presents
a summary of the case study findings.
Access to Technological Knowledge
The PBI often focuses on ad hoc strategies for pro-
jects. Research has shown that project-based working
can act as a major limiting factor for learning and in-
novative potential (Dubois and Gadde, 2002; Gann
and Salter, 2000; Keegan and Turner, 2002; Prencipe
and Tell, 2001; Winch, 1998). From the knowledge-
based view and alliance literature it is known that
learning competencies from partnerships are impor-
tant to develop competitive capabilities (Hamel,
1991). These studies focus on organizational learning
and absorptive capacity (Lane and Lubatkin, 1998;
Mowery et al., 1996). Grant and Baden-Fuller (2004),
however, stated that the primary advantage of alli-
ances is in gaining access to knowledge rather than in
acquiring knowledge. Firms have access to their part-
ner’s stock of knowledge to exploit complementari-
J PROD INNOV MANAG 65
2009;26:58–70
ties, but with the intention of maintaining its distinc-
tive base of specialized knowledge. The authors men-
tion that when firms focus on acquiring (learning)
knowledge from each other the outcome may become
a competition for learning (Hamel, 1991).
Although literature about capabilities mostly dis-
cusses long-term relationships between firms, part of
this literature can also be applied to shorter-term co-
operations. The firms involved in Case Alpha gained
access to the knowledge base of the initiating firm,
and they exploited this knowledge while they also
maintained their own distinctive specialized knowl-
edge. However, the initiator of Case Alpha (i.e., the
contractor firm) did not have access to or learn from
the capabilities of its partner firms. The initiator firm
did not view the innovation as a core competence, and
no strategic intent was placed in gaining access to the
knowledge base of the other firms. The partner firms
learned, from the initiating firm, the important ele-
ments of the innovation of underwater concrete and
reproduced their own version of a method and prod-
uct in this field. Over time the partner firms were able
to execute the full process of constructing underwater
concrete. Through knowledge leakage the partner
firms acquired the knowledge from the initiating
firm and broadened their knowledge base, and a com-
petition for learning arose in which there was a win–
lose result. This finding is confirmed in Hamel (1991),
who stated that partners with more similar capabili-
ties (in this case, capabilities in underwater concrete)
can end up in a competition to learn.
The other case studies were mainly based on gain-
ing access to complementary capabilities in which
partners perceived a win–win situation. Partners
were selected based on their specific expertise in a
field that was important to develop the intended in-
novation. Cases Beta, Gamma, and Delta were not
aiming at learning each other’s capabilities, but part-
ners were mainly interested in having access to and
combining each other’s technological capabilities. In
case Delta, the partners stated clearly that they did
not share technological knowledge with each other
but that they applied their specific competence in the
project. All partners in both Case Gamma and Case
Delta kept their own competence base and did not
broaden their competence with the technological
knowledge of the other partner. The firms in these
two case studies maintained differentiated knowledge
bases, which according to Grant and Baden-Fuller
(2004) can develop in a stable and long-term relation-
ship. Especially in Case Gamma (some relationships)
66 J PROD INNOV MANAG P. M. BOSCH-SIJTSEMA AND T. J. B. M. POSTMA
2009;26:58–70

Table 1. Summary of Case-Study Comparison

Case Alpha Case Beta Case Gamma Case Delta

Partners Contractor firm (initiator) Large contractor Consultant firm in Architect firm
Suppliers (concrete, firm (initiator) construction (initiator) Holding firm:
diving and concrete pumps) Large concrete Universities -knowledge center
R&D institutes (testing development firm R&D institutes (initiator)
prototypes and method) Suppliers (steel, concrete, - selling center
installations)
Contractor

Knowledge Transfer of knowledge Access to each other’s Access to each other’s Access to each other’s
Capabilities through patents, capabilities in capabilities in technological capabilities in technological
publications. construction, processes knowledge about concrete, knowledge about 3D
Transfer through and concrete. Learning steel and installations. modeling, innovation
experience. Learning of market knowledge Acquiring and developing processes and calculation
method and product by knowledge in organizational techniques. Learning of
project partners issues and market knowledge implementation of
innovations and process
of innovation project.

Governance Contract and price- Pure mutual-trust Trust relationships with Trust relationships with
mechanisms based relationship based relationship standard contract standard contract

Openness and Competitive. Open and transparent Openness and transparency Openness and transparency
transparency Closed and no for the project high in conceptual and high throughout whole
transparence in sharing exploitation phase. project.
knowledge

Intent of Win-lose strategy Slight win-win strategy Win-win strategy in Win-win strategy for
cooperation (not high priority in conceptual and all firms.
both firms) exploitation phase

and Case Delta these cooperative relationships devel-
oped mutual competence and intentional trust and
built a long-term commitment (this commitment was
extended to other business projects as well). Hamel
(1991) explained this by stating that firms converge
into long-term relationships as a consequence of
their strategic intent to do so. Also, the cooperation
develops over time because firms mutually generate
competence and intentional trust through openness
and transparency of knowledge transfer. Sydow
(1998) stated that when trust is once established
in an interorganizational relationship, it stabilizes
exchange relationships, which in turn increase
chances to enhance trust. Furthermore, trust could
constitute trustworthiness and, in the end, competitive
advantage.
Proposition 1: Cooperation aimed at a mutual strategic
benefit in mutually gaining access to the knowledge
bases of the involved firms while maintaining their own
differentiated knowledge base can result in a more
stable and longer-term relationship with mutual trust
between the cooperating firms.
Organizational and Market Knowledge
As mentioned already, a large part of the literature on
alliances and partnerships focuses on learning and
knowledge transfer. From the cases it became clear
that partners especially gained access to their cooper-
ating partner’s technological knowledge. However,
the cases show that besides technological knowledge
(which implies expert knowledge about the content of
the innovation), other types of knowledge were im-
portant in the cooperative projects. These kinds of
knowledge were either transferred between the part-
ners or were developed within the cooperation. From
the case studies we learn that organizational and mar-
ket knowledge were transferred or developed. In the
early phases of the innovation projects (development
of concepts) the focus of the partners was mainly on
specifying each other’s knowledge base (technological
capabilities) in such a way that tasks could be allo-
cated according to the specific knowledge base.
In the early phase of an innovation project, mem-
bers discussed mutual expectations, risks, financial
aspects, division of tasks (based on each others’
COOPERATIVE INNOVATION PROJECTS
capabilities), and governance issues for the innovation
project. In later phases, knowledge transfer and cre-
ation focused more on creating experiences in real-life
situations for testing and prototyping. These experi-
ences were in organizational experiences of how to set
up such a real-life test and what to do with the tests
results of the prototypes (e.g., problems). Partner
firms mentioned that they together developed
knowledge about the process of innovation and the
organization of the innovation project (especially im-
plementation aspects were learned in Case Delta). In
the final phase of the innovation project, competen-
cies about the market and the customers became more
important. In Case Gamma, the initiating firm at-
tracted new firms that had a good overview of the
market and the requirements of its customers. In these
relationships, other knowledge besides technological
knowledge was contributed by the partner firms.
Importantly, in especially Case Gamma and Case
Delta, was that partners developed a mutual trust-
based relationship to combine technological knowl-
edge and to share and develop organizational and
market knowledge. For example, in Case Gamma it
was necessary for the partner firm to have experience
and mutual trust with the initial firm of Case Gamma
before it was willing to present market information to
the leading firm. Firms gained not only access to and
created technological knowledge but also knowledge
about the other firms (their way of working, organiz-
ing, and way of perceiving the market; see Case
Gamma and Case Delta and partly Case Beta). Learn-
ing about the other firm helped to develop a mutual
trust relationship and continuation of the relationship
(in Case Gamma and Case Delta).
Proposition 2: In a cooperation aimed at a mutual stra-
tegic benefit in mutually gaining access to the knowl-
edge bases of the involved firms, partners not only gain
access to each other’s technological capabilities but also
develop and share knowledge about organizational as-
pects and market situations and gain knowledge about
the way of working of the partner firms.
Codifiability of Knowledge
In knowledge literature, the transferability of knowl-
edge is an important issue. Knowledge that cannot be
easily observed and codified is rare, costly, and diffi-
cult to transfer (Spender, 1994). This type of knowl-
edge brings a competitive advantage to firms. In a
recent study, the interaction between codifiability of
J PROD INNOV MANAG 67
2009;26:58–70
knowledge and the governance mode of contracting
(making use of the market) was investigated (Fey and
Birkinshaw, 2005). The authors found a negative re-
lationship between situations in which knowledge is
more codifiable and leakage (spillover effects) of
knowledge toward contracting partners becoming
more evident. These results confirm the situation in
Case Alpha, in which a contracting mode of gover-
nance was used and knowledge was leaked to the con-
tracted partners of Case Alpha. The knowledge was
leaked in such a way that the partners became compet-
itors on the developed innovation. Case Beta, Case
Gamma, and Case Delta all concerned knowledge that
was more difficult to transfer and codify, and the knowl-
edge was based on expertise and experience in specialist
areas. The partner firms in these cases had specific (firm)
inimitable capabilities that they contributed to the part-
nership. This knowledge is more difficult to transfer to
competitors. In Case Gamma and Case Delta parties
did not transfer this knowledge but created new knowl-
edge in combining the different competencies.
Proposition 3: In a cooperation aimed at a mutual stra-
tegic benefit in mutually gaining access to the knowl-
edge bases of the involved firms, noncodifiability of the
capabilities is conditional to create a win–win situation.
Governance Mechanisms
The innovation projects that were most successful in
terms of long-term cooperation (Case Gamma and
Case Delta) applied a governance structure in which
the main focus was on mutual trust (both competence
and intentional trust). However, besides trust, the co-
operation also involved a general contract that dealt
with issues like ownership, conflict situations, and fi-
nancial aspects. This is also in line with recent findings
stating that contracts and (high) trust go hand in hand
(Klein-Woolthuis et al., 2005). Some studies compare
different forms of partnerships (Fey and Birkinshaw,
2005; Thompson and Sanders, 1998) in which they
usually describe two extremes: partnering and con-
tracting. Partnering refers to developing new knowl-
edge through relationships with specific partner firms
based on mutual trust (e.g., strategic alliances, con-
sortia of suppliers and customers). Contracting refers
to acquisition of knowledge on a market basis. Firms
with an arms’ length contracting relationship focus
mainly on the output of the relationship instead of on
the development of knowledge. For coordination of
their activities, they apply a price system (see Hennart,
68 J PROD INNOV MANAG
2009;26:58–70
1993). In a price-based system agents are rewarded
based on their outputs; price constraints, however,
also encourage cheating.
Case Alpha refers to sole contracting, whereas Case
Gamma and Case Delta (and partly Case Beta) are
perceived as partnering relationships (partnering in
this respect is a governance mechanism and should
not be confused with partnering in the construction
industry for business projects between customers and
suppliers; see, e.g., Bresnen and Marshall, 2000).
From the case studies, it becomes clear that in a con-
tracting relationship, members are less open to shar-
ing information and there is limited trust between the
partners (see Case Alpha). Furthermore, because
there is limited trust, the cooperation is based on a
contract in which tasks, risks, responsibilities, and fi-
nancial aspects are discussed in detail. A partnering
relationship that is based on mutual trust can develop
into a long-term commitment of the involved parties
as in Case Gamma and Case Delta. Here, partners
relied on each other’s competencies and were open in
sharing knowledge and information with each other.
Industries with free-flowing information trading are
found to have lower search costs and more innovation
(von Hippel, 1988). Powell (1996) found that not all
trust-based governance operates in the same fashion.
He discussed R&D networks in which trust was based
on a common membership in a professional commu-
nity (technologic or scientific community). Especially
in Case Gamma this kind of trust governance was
found in the conceptual phase (scientific community),
whereas Case Beta shared a technological community.
In the production phase of Case Gamma, longer-term
manufacturing relationships were developed, and
trust grew over time in this relationship. In the alli-
ance of Case Delta, the partners also mentioned that
an open environment and mutual trust took time to
develop. This is confirmed by Powell, who discussed
trust governance of alliances and collaborative man-
ufacturing as emerging out of a mutual dependency
and pointed out that trust must be created in these
cooperatives. It is assumed that trust between coop-
erating firms contributes to significant reduction of
transaction costs, opens up opportunities for strategic
action, enhances system stability, yet supports orga-
nizational change (Sydow, 1998).
Proposition 4: A cooperation aimed at a mutual stra-
tegic benefit in mutually gaining access to the knowl-
edge bases of the involved firms is based on mutual
competence and intentional trust as its main governance
P. M. BOSCH-SIJTSEMA AND T. J. B. M. POSTMA
mechanism, whereas contracting between market par-
ties aimed at knowledge–output transactions is repre-
sented by limited trust and arms’ length (contractual)
relationships as its main governance mechanism.
A final note is that from our case studies one learns
that it is difficult for firms in the construction industry
to execute development projects because some firms
had little experience in performing innovation pro-
jects in cooperation with other firms outside business
projects. For Beta, Gamma, and Delta, the develop-
ment of longer-term relationships outside the scope of
business projects took time and energy. This is con-
firmed by other studies in project-based industries,
which indicate that projects are always performed in a
context and have a history (Engwall, 2003) and that
managers of innovation projects are influenced by
their experiences of managing business projects. These
managers had more difficulty with innovation pro-
jects with high uncertainty and unclear targets
(Blindenbach-Driessen and Van Den Ende, 2006).
Conclusion and Discussion
In this paper innovation projects in a PBI (construc-
tion industry) are discussed, and a knowledge-based
perspective is applied. From current literature, an im-
portant issue in project-based environments is the low
performance in innovation (Winch, 1998). Others
found that firms based on projects do not provide a
context supportive of innovation, since they prioritize
efficient management of projects (Keegan and Turner,
2002). Especially in project-based firms, most coop-
eration focuses on a contracting relationship instead
of on a trust-based relationship. In the Dutch con-
struction industry, partnering relationships are on the
one hand demotivated by governmental regulations
and on the other hand firms afraid of knowledge
leakage and competition. Following Blindenbach-
Driessen and Van Den Ende (2006) we distinguish
between business projects and development or inno-
vating projects. In this paper the latter category is
studied. The first part of our research question dealt
with the kind of capabilities acquired or gained access
to and their implications for the cooperation. From
our findings in the different case studies it is derived
that firms based on projects can create a more
innovative context when they cooperate and aim for
complementary capabilities. This implies that firms
should gain or give access to and should combine
these capabilities but should essentially keep their
COOPERATIVE INNOVATION PROJECTS
own separate knowledge base instead of broadening
their knowledge base with technological capabilities of
cooperating partners. Partnerships with complemen-
tary technological capabilities and mutual trust
relationships develop and share (new) knowledge on
organizational and market issues. A strategic focus of
firms on cooperation based on giving access to and
combining each others skills, instead of acquiring, can
be positive for the innovative potential and for devel-
oping and strengthening a competitive advantage.
The second part of our research question discussed
the governance mechanism applied by the innovation
projects. It was found that firms focusing on mutually
gaining access to the knowledge bases of their part-
ners can develop a stable relationship based on
mutual trust as their main governance mechanism.
According to Gann and Salter (2000), development
projects should not be separated from the rest of the or-
ganization, since this gives undesired side effects. These
side effects can be found in the internalization of partner
firms’ capabilities or in absorbing the new knowledge
developed during the innovation project. Furthermore,
awareness of history, path dependency, and context of
project-based firms in performing business projects is
important (Blindenbach-Driessen and Van Den Ende
2006; Engwall, 2003). The way a business project is per-
formed is usually based on contracting governance
mechanisms and output-oriented transactions, whereas
an innovation project is organized and coordinated
rather differently and firms aim at gaining access to
knowledge bases of their cooperation partners.
The paper concludes with some practice-oriented
suggestions based on this study for firms in project-
based environments. Succeeding in transferring and
creating knowledge in cooperative innovative projects
is based first on the selection of partners. This selec-
tion is based on partner firms’ intentions (intentional
trust) and competencies (competence trust), their ex-
perience in cooperation and innovation, and the fa-
miliarity of the partner firm in terms of reputation,
friendship or family (Nooteboom, 1999, 2002).
Furthermore, the firms should perceive benefits in
cooperating (financial benefits, increase in skills and
market, spreading of risks and costs).
Second is the process of cooperation during the
project (Nooteboom, 1999, 2002). It is important that
ex ante articulated expectations are fulfilled and that
there is a collaborative attitude among the partner
firms in the form of transparency, open communica-
tion, and information transfer and discussions of pos-
sible conflicts and missed expectations.
J PROD INNOV MANAG 69
2009;26:58–70
Third, certain conditions are important for accom-
plishing a cooperative innovation project. One main
condition is the support (both managerial and financial)
of higher management of the participating firms. Espe-
cially managerial support increases the opportunity of
transferring knowledge and internalizing this knowledge
in the firm. Furthermore, the strategic importance of the
project legitimizes the acceptance and internalization of
new knowledge in the partner firms. When there is a low
strategic importance, there is probably a lack of mana-
gerial support for internalizing new knowledge.
Finally, the participating firms working according to
project-based principles should formulate a strategy of
how to transfer knowledge of partner firms’ capabilities
or new knowledge of the innovation project to the
business projects. The internalization of the gained
knowledge from the cooperation becomes important
for business projects as well. Besides the formulation of
a strategy, the PBF could focus on showing the benefits
and consequences of new knowledge in the form of les-
sons learned and success stories. Other possibilities are
promoting knowledge sharing over project boundaries
by boundary spanners (e.g., personal contacts across
functions and or projects, liaison roles, cross-project
teams; see Cohen and Levinthal, 1990) or an incentive
structure (e.g. based on team performance).
The findings of this study are based on a few case
studies in one country, but the cases illustrate the
propositions and the discussion on knowledge acces-
sibility and governance mechanisms in cooperative
innovative projects. Further research in this field is
needed to be able to present frameworks and guide-
lines for project-based firms on how to govern and
manage cooperative innovative projects.
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