Headquarters’ Control Capacity and the Choice of R&D Organizational Forms Abroad

Mehdi Nekhili (), Dhikra Chebbi Nekhili and Walid Cheffi ()
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Dhikra Chebbi Nekhili: Université de Bourgogne
Walid Cheffi: Groupe ESC Rouen

Working Papers FARGO from Université de Bourgogne - Latec/Fargo (Research center in Finance,organizational ARchitecture and GOvernance)

Abstract: The paper aims to explain the choice of organizational forms by multinational companies (MNCs) when decentralizing abroad their R&D activities. We identify five main organizational forms: wholly owned green-field subsidiary, wholly owned acquired subsidiary, joint venture, cross-licensing agreements and unilateral licensing agreements. On the basis of questionnaires addressed to the R&D managers of American and European MNCs, we highlight that the choice of an organizational form is related to the firm’s capacity of control, performance measurement and incentive systems, to resolve the agency conflicts in each form. Our findings show that the internalization choice is underprivileged because of behavioral control difficulties. The possibility of ensuring a strategic performance evaluation of R&D activities favors the cross-licensing agreement over the joint venture choice. Finally, the choice of unilateral licensing agreements is not supported because of feasibility issues concerning the financial evaluation of the performance of R&D activities.

Keywords: R&D; foreign investments; multinational companies; control mechanisms; organizational Forms. (search for similar items in EconPapers)
JEL-codes: F23 L22 (search for similar items in EconPapers)
Date: 2009-05

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