Creating competencies through collaboration:

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European Management Journal Vol. 18, No. 6, pp. 590–604, 2000  2000 Elsevier Science Ltd. All rights reserved Printed in Great Britain S0263-2373(00)00052-9 0263-2373/00 $20.00

Creating Competencies Through Collaboration: The Case of EUREKA R&D Consortia CAROLINE MOTHE, Paris Nanterre University BERTRAND QUE´LIN, Groupe HEC, Paris This article discusses the originality of European EUREKA consortia. Formed at the initiative of member firms, these consortia generally adopt a decentralised structure. Their main purpose is to conduct applied research, with the ultimate goal of exploiting its commercial opportunities. The consortia strive to ensure collaboration among firms in different countries, and at times, from different industries. Examining the management of R&D consortia, this article focuses primarily on the creation of new knowledge and competencies and on the benefits that member firms can reap from collaboration. Based on 20 interviews with project managers, the article brings to light two main observations: (1) the leader’s positioning is a determining factor, and (2) a perfect balance between the firm’s technological development and the consortium’s strategic orientation facilitates the acquisition of competencies.  2000 Elsevier Science Ltd. All rights reserved Keywords: Competence, Technological resources, R&D, Consortium, Co-operation

Introduction A key dilemma that many corporations confront today is whether they should develop new products and processes independently or participate in collaborative R&D efforts. Collaboration is perceived as an approach where success is difficult to achieve. In fact, consortia are sometimes ‘a major disappointment to their supporters’ (Leibowitz, 1990). Collaboration, however, is also acclaimed as a new 590

managerial approach for exploiting and developing resources and competencies. More and more firms are getting involved in research and development (R&D) partnerships. The formation of co-operative ventures is generally premised on expectations of increased competitive advantage for each firm involved. Indeed, successful management of a cooperation entails an improvement (or at least the maintenance) of most companies’ competitive position. The pre-competitive nature of R&D collaborations enables firms to reduce costs and to share risks, which leads to an important advantage: the ability to conceive innovations from the technological developments generated by the co-operative efforts. Many authors have argued that this capacity, which enhances competitiveness, is based on the creation of new resources, innovative knowledge and competencies different from those of the firm (Sevon and Kreiner, 1998; Koza and Lewin, 2000). In fact, one of the main interests in forming R&D consortia is to bring altogether in-house and dispersed resources and competencies. Complementary with in-house R& D projects, then, consortium projects can play an important role in the creation of resources and competencies (Badaracco, 1991; Gibson and Rogers, 1994; Aldrich and Sasaki, 1995). In this article, we focus on the creation of new technological resources, competencies and knowledge.1 We do not consider return on investment and the impact of collaborative efforts on in-house R&D — traditional methods of assessing R&D outcome (Irwin and Klenow, 1996; Link et al., 1996). Our objective is to study and uncover the factors that favour this resource creation in R&D consortia,2 and more specifically, in European EUREKA consortia. European Management Journal Vol 18 No 6 December 2000

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We conducted interviews with 21 R&D managers involved in EUREKA R&D projects. This qualitative research, described hereafter, focuses on a key managerial issue: what are the conditions for creating new resources for a partner firm? The first section discusses the EUREKA initiative and the main characteristics of R&D projects with the EUREKA label. The second section sets forth the paper’s methodology while the third focuses on the various factors facilitating resource creation within EUREKA projects. Using examples from various EUREKA projects, we will examine a number of important aspects: the nature of partners’ involvement, their strategic objectives, internal R&D capabilities, membership rules, organisational design, task division, role distribution and mutual activity within the consortium. Finally, we will discuss the benefits of EUREKA collaborations and, more generally, their implications on the relationships in R&D collaborations.

What are EUREKA R&D Consortia? EUREKA is a pan-European framework for R&D collaboration.3 The initiative was based on the idea that knowledge can be increased if organisations with complementary knowledge (companies, research centres, universities) had an opportunity to conduct their R&D activities in a co-operative manner. EUREKA is a Research and Development framework through which industry and research institutes from 25 Western and Eastern European countries4 develop and exploit the technologies crucial to global competitiveness and to a better quality of life. The aim is to strengthen European competitiveness by helping organisations to work together on collaborative R&D projects in most fields of advanced civil technology. The nine technology areas cover medical and biotechnology, communication, energy, environment, information, laser, materials, robotics and production automation, and transport industries.

The Hanover Charter The Hanover Charter established the EUREKA initiative. Its conditions and objectives are outlined below: EUREKA’s objectives: one of EUREKA’s main objectives is to enable Europe, through closer cooperation among companies and research institutes in the field of advanced technologies, to master and exploit the technologies important for the future and to build up its capability in crucial areas. This will be achieved by encouraging and facilitating increased industrial, technological and scientific co-operation on projects aiming to develop products, processes and services. European Management Journal Vol 18 No 6 December 2000

EUREKA focus and four criteria for membership: 1. EUREKA is open to all efficient capacities including those existing in small and medium-sized enterprises (SME) and in smaller research institutes, where many of the innovative technological products and processes are initiated; 2. The project must bring together private companies, universities and other private or public institutions. The exchange of technologies between European companies and institutes is a prerequisite for the establishment of a high technological standard in European industry; 3. EUREKA projects must satisfy the following conditions: multi-nationality (participants must be from more than one European country), specific and defined expected benefits, use of advanced technologies, objective of securing a significant technological advance in the product, process or service concerned, appropriately qualified participants on the technical and managerial levels, and adequate financial commitment by participating enterprises; 4. While EUREKA’s purpose may be to conduct applied research and development, the project must nevertheless have a strong market focus. It must produce results that members can commercialise, either individually or jointly. A market-oriented R&D project is best managed by those aiming to commercialise its results. These managers alone are the best judges of what will succeed. In response, EUREKA’s ground rule is ‘bottom–up’ management. Consequently, the partners, rather than the EUREKA secretariat or any government, propose and define their project in response to their own needs. Once the project is launched, it is the participants who manage it and exploit its results. They decide who is involved, how the partnership is managed, who contributes what and how the results will be shared. They also own 100 per cent of the intellectual rights of all results deriving from the project. The EUREKA secretariat simply acts as a facilitator, helping participants to communicate, collaborate and obtain funding from their national governments. EUREKA’s positioning compared to both national and European programs is rather unique.5 Unlike other famous European Union (EU) programs such as ESPRIT, BRITE, EURAM, etc., EUREKA has its own political superstructure and its own headquarters (Table 1). EUREKA projects also benefit from decentralised funding mechanisms. The EUREKA label sets a project apart from others by making it eligible for national funding programs, private sources of finance and standard-setting authorities, among other organisations and associations. Furthermore, the considerable public relations effect can lead to free publicity material for each participant to promote the project. 591

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Table 1

Main Differences Between European Union Programs and EUREKA Consortium

Ground rule Program generation Supervision Funding source Research results

EU programs

EUREKA consortia

Pre-competitive R&D

Development of marketable products and services Bottom–up project generation by partners

Top–down generation by the European Commission (EC) EC supervision Large central funding source Research results are property of both EC and partners

Business agreements between partners Decentralised funding source Research results are property of partner(s)

Source: EUREKA Secretariat

Characteristics of EUREKA Projects With 25 countries and the EU Commission as members, EUREKA also maintains links to a great number of non-European countries. The EUREKA initiative is organised as projects, some of which only involve two or three partners, while others are very broad ‘umbrella’ projects, possibly with many sub-projects. In this case, the participants may include more than 100 organisations.6 EUREKA encompasses three main types of projects: ❖ A few large projects resemble true broad ‘programs’. They mobilise dozens of partners in numerous sub-projects, each of which has a specific structure grouping all the partners as well as a structure specific to each individual partner (generally different for each sub-project) and the supporting governments. These types of projects (JESSI, PROMETHEUS, HDTV, EUROTRAC, ESF), account for approximately half of the public funds received for all Eureka projects; ❖ EUREKA administration has created fourteen (originally six, then followed by eight more) ‘umbrella’ structures in various sectors (production technologies with FAMOS, navy technologies with EUROMAR, environment with EUROENVIRON, bio-technologies with EUROAGRI, etc.) in order to encourage meetings and new projects, especially those originating from small companies; ❖ The third category of projects comprises the bulk of ‘ordinary’ projects, i.e. all other projects that do not fit into one of the above-mentioned categories. Table 2 details the cost and number of participants in the ‘programs’ and ‘umbrella’ projects. The following example is that of an ordinary EUREKA project. Digipress is the leader of the EUREKA project called Eurocare-Last (EU 390), which aims to develop optical disks with a guaranteed life span of several centuries. The basic idea of this consortium is to replace the disk materials presently used (mostly plastic) by longer lasting mineral composites. On the technical level, the collabor592

ation strives to further improve the glass by replacing the gold with an even stronger material that can adhere well to glass, possibly titanium nitride. Digipress, a French SME founded in 1985, collaborates with Glaverbel, a Belgian glass manufacturer. The partners have satisfactorily defined the workload and each will remain the owner of its technological contributions. Digipress is to master compact disks. Besides developing a plating process to be carried out at low temperatures, it also makes the various coatings, produces samples and defines the mechanical and climatic tests. Glaverbel is to develop a tempered glass, which is both shock- and damp-proof and heat resistant. In addition to conducting research on glass, Glaverbel produces the disks. The main target market will be data archiving, a rapidly developing segment. Libraries are also expressing great interest as book preservation methods are far from perfect despite the precautions taken.

Specificity of EUREKA Projects The six main features distinctive of EUREKA projects are: ❖ They are not specialised in one specific industry: firms participating in EUREKA projects conduct activities in nine largely-defined economic sectors; ❖ EUREKA projects are not intended to be ‘pre-competitive’: they are less concerned with basic research than with near-term research. The activities of EUREKA consortia are mainly downstream while the development process is usually undertaken by an individual firm; ❖ EUREKA projects mainly associate four different types of partners: manufacturers, potential users of the product or process developed, public laboratories, and universities. In contrast, EU programs have fewer industrial companies and more research-oriented entities; ❖ EUREKA consortia are usually formed at the initiative of the participants, not by governments. An industrial firm almost always initiates EUREKA consortia. Unlike EU programs’ ‘top– down’ approach which makes them difficult to European Management Journal Vol 18 No 6 December 2000

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Table 2

Projects: Cost and Number of Participantsa

‘Broad programs’

Number of participants

Cost in M$USb

EUROTRAC 30 120 ESF 26 400 PROMETHEUS 228 900 HDTV 66 900 JESSI 31 4400 Eurotrac: transportation (Universities, Research Laboratories)c ESF: electronics Prometheus: automotive technology HDTV: High Definition TV (Thomson, Philips N.V.) Jessi: semiconductors (Philips N.V., Siemens, SGS-Thomson)

‘Umbrella projects’

Number of participants

Cost in M$USb

EUROLASER 30 EUROMAR 18 FAMOS 44 EUROCARE 24 EUROENVIRON 17 Eurolaser: laser technologies Euromar: navy technologies Famos: productics Eurocare: health technologies Euroenviron:environment

24 2 1 8 0.3

a

As of 30/6/1992 1 US$ ⫽ 0.7 ECU c Project leaders are represented in parentheses b

manage, the ‘bottom–up’ approach to co-operation adopted by EUREKA projects allows firms to choose their partners freely for common R&D projects;7 ❖ The projects are financed by individual European governments, and not by a common European budget, as is the case for EU projects. Public aid is thus provided on a national basis. Each country may — or may not — support the national member(s) involved in a EUREKA project; ❖ Finally, the participants’ rights differ from those in EU projects: the proprietary rights remain with the EUREKA consortium members while they are partly public in the case of EU programs. EUREKA projects face high financial and technological risks, but in most cases, commercial application can be rather precisely defined.

Some Figures on EUREKA EUREKA has a portfolio of more than 600 active projects and over 600 completed projects. Thousands of companies and institutions have been involved in

EUREKA projects, and it is estimated that currently, around 3000 are actively involved. Approximately 150 new projects are endorsed every year. Most observers consider EUREKA to be a great success. In one of the few evaluation studies of the EUREKA program, no less than 65 per cent of the industrials stated that their EUREKA project either had already successfully developed a new product or will do so in the future (Figures 1 and 2).8 As of June 1999, 14 years after the start of the EUREKA initiative, 25 countries and 5400 European members have been, or are, involved in these R&D consortia (in comparison with 2500 members in 1991). The 1408 projects (686 in process, 722 completed) were categorised into nine technology sectors. Half of the industrial participants in EUREKA projects are large firms, and the other half, SMEs (Small and Medium Sized Enterprises, with less than 500 employees). Large firms are usually those with more than 2000 employees. The SMEs are, for the most part, very small companies with fewer than 100 employees (30 per cent of the sample, or more than

Figure 1 The EUREKA Project Portfolio by Technological Area (1999)

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Figure 2 Value of the EUREKA Finished Projects (MECU)

58 per cent of SMEs). Seventy-one per cent of companies with fewer than 100 employees and 46 per cent of the other SMEs are private (60 per cent of all SMEs are thus private). Figure 3 provides some other descriptive statistics on the partners involved in EUREKA projects.

Research Methodology Although data was gathered mainly through semistructured interviews lasting between one and a half and 3 hours, press releases and public information about the participating companies provided additional information. Two researchers conducted and recorded the interviews. The interviewee was typically the manager responsible for the project in the company. Structured in discussions, the interviews covered issues including the content and objectives of the project’s different partners, the content of the collaborative agreement, the resources involved in the project and the competencies created as a result of participation in the collaboration. This data-gathering method enabled us to develop a considerably indepth understanding, both of the reasons for entering into EUREKA consortium and of the management of competencies.

The purpose of the case studies was to help describe, then analyse, the factors that determine the creation of new competencies. It led us to adopt a close-tothe-field research methodology. The principle of case study research was applied through the focus on cases in one company and by analysing available external and internal documents (Yin, 1985). All in all, data was collected over a three-month period and interviews were conducted over two years. The following discussion is based on an in-depth analysis of first-hand interviews with 21 R&D managers involved in already completed EUREKA projects. It attempts to establish the influences between the most relevant dimensions of co-operation and each type of scientific or technological resource created by an R&D consortium. A company-based approach was adopted in order to identify the competencies that have been either improved or created by each individual partner rather than by the R&D consortium. The study considered that only through the examination of finished projects could both tangible results and intangible competencies be quantified. Consequently, the focus was uniquely on companies, as research institutes and universities, which mainly conduct fundamental research and generally do not intend to exploit results commercially.

Figure 3 Size of Partners in EUREKA Projects

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It appeared clear not only that the creation of competencies was an important aspect for all companies, but also that most firms were seeking for both new products/processes and for the development of new knowledge. By evaluating the projects’ results, effective measures of new technological resources, competencies and knowledge were elaborated. We assumed here that the scientific and technological results which a firm can create in an R&D consortium include: (1) the final results (such as product and/or process improvement and/or development), (2) and the intermediary results (such as prototypes, norms, licenses or publications). Besides these visible results, we also take into consideration the creation of indirect intangible R&D results, such as new organisational know-how and technological competence.

We therefore have a fairly complete spectrum of different resources that can result from technological projects. They can be tangible or intangible, complex or simple, observable or non-observable. Table 3 provides the results obtained from large firms and SMEs.

It is interesting to identify the elements that influence the creation of resources. They are linked both to the organisation of the partner firms themselves and to the R&D consortium. Our full research is based on a sample of 317 industrial partners having participated in EUREKA consortia prior to 1994. Using the EUREKA secretariat list, 21 consortia were selected to reflect a cross-section of R&D consortia within the overall population of EUREKA projects. Information about each consortium’s effectiveness and its creation of resources was gathered through personal interviews with 21 project team leaders. We asked about all aspects of the consortium, including its origin, history, organisation, purposes, membership, mode of operation, technical and organisational effectiveness and output. However, since access to confidential elements was denied, some factors that may be linked to resource creation (such as proprietary rights or profit distribution agreements) were not considered in this study.9

Market-focused, EUREKA projects provide opportunities both to enhance knowledge and experience and to develop technologies/products promoting the goals and strategies of the project community as well as of each individual member. Many EUREKA projects in the 1993 evaluation yielded prototypes, which needed further technical development to produce end products tuned to the needs of customers and at an acceptable cost. The sampled firms also benefited from numerous technological and commercial improvements, which typically manifested themselves in the form of:

The dimensions used to validate the questionnaire were designed specifically for this study. Based on previous evaluations of European consortia, they were then confirmed by the 21 interviews with different European R&D project managers. We operationalize the creation of resources and separate resources into tangible benefits, measured by 10 dimensions, and intangible benefits, measured by four dimensions (Freeman, 1982; Hall, 1993). The 14 different items are10: ❖ Tangible results (corresponding to our definition of the intermediary and final results) were measured on 10 dimensions: (1) improvement of existing products, (2) new products, (3) improvement of existing processes, (4) new processes, (5) prototypes, (6) patents, (7) licenses, (8) norms and standards, (9) doctorates and Ph.D. and (10) publications; ❖ Intangible results (the indirect effects of results) were measured by: (1) improvement of knowhow, (2) increase in scientific knowledge, (3) increase in technical knowledge, and (4) increase in personnel qualifications. European Management Journal Vol 18 No 6 December 2000

Managing R&D Consortia for Success By 1993, the EUREKA secretariat, which analysed 339 ongoing projects, had managed one of its largest evaluations. 88 per cent of all participants had expected to produce a new or improved product or process, and 40 per cent among them had actually already achieved this.

❖ new working methods and routines (adoption of scientific methods in business companies to enhance the organisational learning capacity); ❖ significantly improved hardware and equipment (new pilot plants, experimental facilities and instrumentation for development work). Our purpose is to provide some general rules for successfully managing these types of R&D consortia and suggest how management can create resources. In addition to proposing solutions to common problems, we will examine two key aspects affecting resource creation: ❖ a partner’s internal capabilities (involvement, Table 3 The 14 Types of Results Created by an R& D Consortium Tangible results Improvement of product New products Improvement of process New processes Prototypes Patents Licenses Standards Doctorates Publications

Intangible results Improvement of know-how Increase in scientific knowledge Increase in technical knowledge Personnel qualification

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coherence between the firm’s and the consortium’s strategic objectives, R&D capabilities); ❖ organisational capabilities (internal rules and membership, consortium’s organisational design, task distribution, shared activities). Evaluating R&D consortia’s accomplishments is a complex task. Table 4 summarises the effects of the main dimensions identified (strategic choice coherence, involvement and distribution of tasks, internal capabilities and intensity of shared activity) on the creation of resources. This information will enable R&D managers to quickly seek data that would help them to create the necessary resources.

Internal Capabilities Existing literature presents a long list of motives for establishing collaborative R&D ventures (Hagedoorn, 1993; Sakakibara, 1997). Strategic Objectives The most common motives are technological complementarity (34 per cent), reduction of innovation time span (31 per cent), and access to market or industry restructuring (31 per cent). Other advantages of R&D collaboration include reduced costs and economies of scale and scope through the minimisation of investment duplications and through the opportunity to spread risks. Consortia therefore serve to share R&D costs and to develop new technology. On a strategic level, co-operation can be considered as an organisational tool necessary to gaining access to resources that are difficult to transfer or that do not have a market for trade. External knowledge can help in-house R&D project teams benchmark, increase their ability to exchange sensitive inforTable 4

Summary of Main Concepts and Measures

Concepts Strategic choice coherence

Involvement

Role and task distribution Internal capabilities

Intensity of mutual activity

596

Measures Importance of project in strategy Objective: sales, or increase in knowledge Financial investment Organizational involvement: Leadership: main partner, partner, other Whether or not the firm has initiated the project Manage, develop, integrate, and/or evaluate Other internal R&D projects in same domain Firm involved in the product development Frequency of meetings

mation and learn from partners. On a functional level, partners in an R&D consortium ally to conduct a joint activity that yields results subsequently shared and exploited in accordance with rules generally defined by the co-operative agreement (Ouchi and Bolton, 1988). As a result, not only is there a transfer of competencies, but also a true creation of resources and value. This reaffirms that one of the principal reasons for firms to collaborate is to learn and to appropriate products from the co-operative R&D process. In summary, the three main strategic objectives of R&D consortia appear to be: ❖ Gain access to partners’ competencies (Teece, 1995; Katz, 1995); ❖ Create new knowledge, skills and competencies (Nonaka, 1994; Nonaka and Takeuchi, 1995; Nonaka et al., 1994; Inkpen, 1996; Que´lin, 1996); ❖ Create value with the results of the co-operative process (Mothe and Que´lin, 1999). The 1993 EUREKA evaluation included 659 industrial and 487 non-industrial participants (in 339 projects). According to the industrial firms, their motivations for joining collaborative ventures were: access to complementary technical expertise (74 per cent) (especially prevalent in new and high-tech industries), cost- and risk-sharing (53 per cent), gaining experience of new markets (31 per cent), establishing standards (23 per cent), and monitoring competitors’ progress (9 per cent). Of almost equal importance is the desire to speed up development, and to search for new knowledge and ideas within the company’s technology base. Risk reduction was also somewhat important (Peterson, 1993; Ormala, 1993). Expected Benefits Two examples can help us to better understand the objectives and results that companies expect from the collaboration. The first case concerns the upgrading of industrial software and the second is in the field of lighting. The first example is ENVIB (Environmental Vibration — Tailoring System — EU 424). This threeyear long project (1990–1993) involved three companies: the Belgian LMS International and the French Matra and Technicatome MVI. The collaboration’s main goal was to develop an integrated system for environmental vibration testing. To realise this objective, technological and application competencies, technical software system development, and international marketing competencies were all needed. Indeed, they existed within the consortium. The ENVIB project resulted in the creation of three software modules (Mission Synthesis, Lexade and Tailor), which have been commercialised since 1995 European Management Journal Vol 18 No 6 December 2000

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in France, Germany, Sweden, the United States and Japan. The software assists industrials in the defence, spatial, automobile and transport industries in the specification, conception and justification processes and verifies that the definition corresponds to the specification. The objective is to personalise this product for each life profile (that is, to all situations that it may encounter during its life cycle, such as storage, transport, handling, maintenance, utilisation, etc.) so that only the strictly necessary resources are used during its development, in accordance with the European norm on conception and tests (NFX 07-144-1). The second case is VEDILIS (Vehicle Discharge Lighting System, EU 273). This three-year long project (1989–1992) brought together every light bulb and headlamp manufacturer in Europe, as well as car manufacturers and university research teams. Its objective was to develop a new vehicle headlamp system, based on discharge lamps, with superior properties for power consumption, life expectancy and performance. The team, led by the Lighting-Signalling division of Valeo group, included the lamp producers Osram (Germany), Philips (Netherlands), and Thorn (Great Britain, acquired by GE Lighting during the project). Equipment manufacturers Bosch, Hella (Germany) and Magneti Marelli (Italy) and automobile manufacturers, clients of all these companies, also participated in the collaboration. The strategic objective was to prepare the regulations for these security products so that national institutes and laboratories can approve them, and to design, build and test prototypes. Involvement Motivation in VEDILIS, members of which enjoyed both a horizontal and vertical inter-firm relationship, was strong as American and Japanese firms were also involved. This common interest and enthusiasm that the European competitors expressed through their involvement in the project easily led to a consensus and to technical harmonisation. This example illustrates that the firm’s commitment in an R&D consortium is a requirement for success. First, its involvement can be a signal to its partners of the desire to establish a long-term relationship. Second, the involvement essentially translates the firm’s determination to successfully complete the research, technical development and/or new product development. Confirming the findings of previous studies (Arino and Doz, 2000; Ring, 2000), the interviews established that a strong commitment is necessary to overcome the natural resistance against risktaking and information sharing. Involvement can be evaluated through the financial investment in the consortium. Project funding is an essential aspect to consider prior to collaboration. Apart from the budget adjustment and payments between the parties, to what extent is the project dependent on governments for financial support? To European Management Journal Vol 18 No 6 December 2000

what extent does public funding influence the rights and obligations stipulated in the agreement? How will it determine each partner’s participation? Collaboration usually yields prototypes and patents when the partner’s financial involvement is high. Involvement can also be assessed by organisational commitment, which itself may be measured by various indicators. For instance, is the firm the project initiator? Is it the project leader (Buckley and Casson, 1988)?11 Unlike the case of financial investments, organisational involvement is higher for projects that are close to the market. This type of commitment leads not only to the two outcomes mentioned above (prototypes and patents), but also to new products and licenses, which can be immediately marketed. Furthermore, each participant can individually benefit through increased technical knowledge and qualified personnel. The ENVIB example illustrates the importance of organisational involvement. The Matra and MVI managers interviewed insisted upon the need for an individual capable of supporting the collaborative project. The experts involved in the EUREKA project must be highly motivated, as personal engagement is a key success factor. If possible, the project should be part of a continuous relationship between partners. The MVI and Matra managers had known each other for more than 12 years and had developed a close relationship that enabled them to solve the problems linked to LMS’ participation. Strategic Coherence As previously mentioned, a high degree of coherence between the R&D consortium’s and the firm’s strategic objectives greatly facilitate commitment to the collaboration. Our observations revealed that an increase in knowledge is expected when the collaborative project is not central to the partner firm’s technological strategy, whereas the resources created are essentially tangible (new products, product improvements, prototypes, doctorates, and licenses) when the project is strategically vital to the firm. In this latter case, the partnership has a direct economic impact on the firm, which can quickly exploit its innovation. In some instances, despite satisfactory tangible results, the increase in knowledge and intangible resources that a partner for whom the project is essential creates is minimal. A logical explanation would be that its objective is basically to increase sales, which is usually the case when the project is central to a partner firm’s strategy. The type of objective sought has an impact on the creation of tangible resources, especially new product improvements and licenses. Indeed, when the objective is to increase sales, these types of outputs are more readily produced because the partner firm is motivated to participate in the product development and in the organisational aspects of the collaboration (as indicated by its position in the consortium: main 597

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partner, partner, sub-contractor, or other). Surprisingly, when the objective is to increase knowledge, no specific intangible resources are created. In the ENVIB example, LMS is a small software provider (150 employees, mostly engineers) present internationally. With ambitious profitability objectives, the firm’s R&D efforts are meant to serve the needs of customers — there was to be no investment made in any collaborative project until the market possibilities were made evident. LMS’ partner was the small MVI (Measures, Instrumentation Vibrations) division of Technicatome (15,000 employees), which was seeking to establish a critical size in order to maintain its competencies in environmental tests and in the qualification of such environments. Known within Technicatome as the company’s model of successful sales, MVI was also eager to enhance its profitability. Halfway through the project, it succeeded in selling some parts to various customers, thereby financing the end of the collaborative project. Essentially a service provider, then, MVI’s activities were complementary to those of LMS, which it already knew through vertical relations. R&D Capabilities A firm’s internal R&D capabilities is yet another factor that contributes to resource creation. When a firm in a EUREKA consortium is involved in the product development phase, it is likely that the project’s activities are positioned relatively downstream in the value chain, close to the market. Usually in possession of the complementary assets needed to market the resulting prototype, the firm participates directly in its commercialisation. Already strongly involved in the product’s development, the firm’s increased technical knowledge and know-how facilitate a quick market launch. A partner firm’s R&D projects conducted in the same domain as that of the EUREKA consortium also attests to the presence of internal existing R&D competencies. However, these competencies, or bundle of capabilities, are situated further back in the firm’s value chain than the product development capabilities discussed above. Thanks to these competencies, when the firm undertakes parallel, or even complementary research, it can more readily create intangible resources, namely improved scientific and technical knowledge and enhanced know-how. After all, its R&D team already has the means and abilities to fully benefit from and exploit the competencies and knowledge contributed by other member firms. Within VEDILIS, all lamp producers, equipment manufacturers and automobile manufacturers have very efficient internal R&D units related to the R&D domain of the EUREKA project. The collaborative project, then, is truly a strategic investment, completely coherent with the partner firms’ individual strategies. 598

Organisational Capabilities Although we have treated EUREKA projects as a distinct analytical phenomenon, they are in fact integrated into member firms’ routine activities. Although EUREKA’s underlying philosophy is collaboration, in practice, each partner avoids becoming financially and labour dependent on the other members. Any division of labour is kept at a minimum, and with little interdependence. It is not surprising, then, that most projects are characterised by a loose formal structure, where the delegation of authority is rather limited. Membership and Internal Rules Recruitment for EUREKA projects is based on specialised contributions to the collective task. The complementarity of competencies, the different functional roles assumed in the consortium and the project’s multinational composition suggest that a diversity of experience, business practices and aims is present. In this perspective, the EUREKA project is a means for the members to experiment, learn and imitate. Some R&D consortia have an open-membership policy, like the Japanese ISTEC project, open to all firms, both Japanese and foreign, but imposes annual fees. In other consortia, membership may be exclusive (SEMATECH, EUREKA). Since the size of a EUREKA consortium changes over time — certain members leave as others join — each consortium must adopt rules and define a policy which allows for an increase in the number of new partners. Before co-operation can begin, participants must sign a contract defining each partner’s role and their rights to the developed product. Despite this formality, the actual organisation, the design of which is decided upon together by the partners, is usually simple. It often consists of an international steering group and local work groups, each with its own ‘main partner’, or ‘project leader’. A governance philosophy to define how the consortium will be ruled and how conflicts will be solved must be established. Certainly, it must be consistent with the EUREKA charter, with the consortium’s field of research and with members’ operating processes. Furthermore, the partners must define the legal aspects of the collaboration, including: ❖ Confidentiality: Consortium members must agree on which type of information is to be considered as secret, confidential or proprietary. They must also specify any bans on publication or communication to third parties and indicate how these confidentiality undertakings will be enforced between the participants; ❖ Co-operation agreement: The grouping’s legal form as well as each participant’s status should be clearly established. If parties structure their coEuropean Management Journal Vol 18 No 6 December 2000

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operation as an R&D contract (which occurs in most EUREKA cases), they need to be aware that the commercial/exploitation phase is not a part of the collaboration. The firms should then negotiate another agreement in order to guarantee the exploitation of the results. Usually, a joint framework agreement is established and separate bilateral co-operation agreements are formed between some of the parties working more closely together. Besides requiring partners to assist each other so that the project can be properly carried out, the contract should also indicate the possibility of subcontracting and specify the circumstances and conditions for new membership (or withdrawals); ❖ Protection and ownership of results: Partners must decide whether each participant will remain the owner of his existing know-how and inventions, or whether certain existing or background technology will be transferred upon termination of the project. Furthermore, partners should consider whether know-how or inventions resulting from the collaboration remain the property of each participant carrying out the research or if joint ownership is possible. It is essential to determine how the research results will be protected and how intellectual property rights, such as patents, will be managed and distributed between the participants; ❖ Exploitation of results: This core issue should be given careful attention during negotiations, not to mention during the drafting of the business plan. Will participants exploit the results jointly or separately? If one participant owns all the know-how, patents, and specifications, limitations on the scope of the licenses to the other participants is necessary. If each participant owns a part of the patents and know-how, partners should consider whether royalties are needed to compensate for unequal contributions, how ownership rights should be allocated (geographically or by field of use), and if the licensee has the right to grant sub-licenses. Organisational Design of the R&D Consortium EUREKA projects are not fully stable and structured entities. They are better characterised as emerging

processes that, in the beginning, change direction and scope. Quite a few projects failed to gather the necessary resources (including financial support) to launch the collaboration. A few projects were confronted with obstacles that prevented all forms of co-operation (property rights, non-compatibility between projects). There are many different designs for organising research consortia (Ouchi and Bolton, 1988; Gibson and Rogers, 1994). Generally, they are not mutually exclusive. Two organisational structures appear to be dominant and are frequently mentioned: the modular structure and the star structure. In a modular structure, the relationships between the workpackages, and indeed between the partners, vary from project to project. The modular approach allows for parallel activities across the different workpackages while coordination is achieved through a network of links between partners (Figure 4). Work on the project is normally divided into workpackages, each of which may be further divided into modules with on-site operational teams. Normally, the workpackage is the responsibility of one of the project partners while the modules may be divided up among the partners (Figure 5). In contrast, co-ordination is centralised in the star, sometimes called ‘hub and spoke approach’. This approach is more typical when there exists a supplier–user relationship within the project, with the central partner being the assembler. In fact, this partner is both assembler and user of the separate output of each workpackage. EUREKA consortia are collaborative research agreements that foster horizontal and/or vertical relationships. Maintaining a focus on process, technology and product development rather than basic research, the EUREKA initiative consists of a collection of either independent or related projects. In general, each member of these consortia works separately on these projects and there is no central research facility as in the case of SEMATECH. There is no central testing organisation for equipment development and no centralised qualification procedure for new equipment.

Figure 4 The Modular Structure

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Figure 5 The Star Structure

Since EUREKA projects are near-term, the intellectual property rights policy is fairly limited. Firms develop proprietary technologies privately; licensing is not systematically stipulated in the co-operative agreement. As no common laboratory is created, a firm’s control of its research is facilitated and knowledge spillover among participants is reduced.

ipating firms was clear in the beginning: MVI and Matra were to develop the three modules separately. Thereafter, LMS would integrate and commercialise them in exchange for royalties. With its expertise in computer-based systems for experimental structural analysis and its experience in European R&D programs, LMS was most suited to act as project leader.

Distribution of Tasks In a EUREKA consortium, besides the decentralised structure, the division of tasks between members is an attractive feature for firms conducting research in new technologies.

However, since LMS did not receive financing from the Belgian/Flemish authorities, the roles and missions of the three firms on the three modules — Mission Synthesis, Lexade and Tailor — varied considerably:

Four main roles that a firm in a EUREKA consortium can assume were retained for this study: management of the consortium, supervision of development, technological integration between partners’ outcomes, and project evaluation. More secondary functions, such as test control or participation in the R& D consortium as an expert, were not considered.

❖ Matra developed Mission Synthesis’ specifications. LMS did not wish to integrate it into its own structure due to the lack of financing. This problem became obvious to its partners only after the first year, costing Matra three months of extra work to integrate the module into the LMS data processing structure. As Matra often used Mission Synthesis internally, it signed a commercialisation contract with LMS, granting royalties of 40% to the developer; ❖ Lexade was realised by MVI, which discovered halfway through the project that the functionalities could not be integrated into the LMS structure. LMS’ strategy, which was to diffuse large quantities of rather low quality and middle of the line products on specific working stations, was incompatible with MVI’s. However, LMS had already developed its own structure for the module, which led to problems with MVI, as it became a potential LMS competitor. Fortunately, prior contracts and links between the two firms helped prevent a clash; ❖ As for Tailor, LMS admitted from the beginning that it did not have an appropriate structure to integrate this module. Matra thus developed it and the coding and commercialisation were sub-contracted to a third firm.

The role that the firm assumes in the EUREKA consortium influences the type of resources created: the management function favours the creation of very diverse results (prototypes, doctorates, patents, licenses, knowledge increase and personnel qualification) whereas the supervision of the technical development essentially yields new products. Another interesting role is the integration of various partners’ results: new processes, prototypes, and patents are the main tangible resources that can be created. This integrating role is probably the best for creating intangible resources (know-how, scientific and technical knowledge, and personnel qualification). A firm’s role that implicates it in the product’s development, especially that of managing the consortium or integrating the technologies, is a strong indicator of its organisational involvement. Indeed, since the partners ensuring the management and/or the integration are those which create the most resources, they tend to seek to assume these two roles simultaneously. These firms are also the most involved in the consortium’s organisation, i.e. they tend to be the main partners. Generally, they are those with the competencies to contribute directly to the product’s commercial development and are therefore capable of increasing future sales. In the case of the ENVIB project, the role of the partic600

In short, LMS gained the most from the project. Main managing partner and project co-ordinator, LMS, having performed practically no technical work, by simply organising and conducting informational meetings and working groups every two months, obtained the output with little investment. Matra, on the other hand, was contributed two modules in European Management Journal Vol 18 No 6 December 2000

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source code (human-readable program statements where any desired modification can be made easily), but received the third one in executable code, which meant that nothing could be modified on the software. Intensity of Mutual Activity Within ENVIB, ordinary meetings were held every two or three months, and technical meetings, whenever necessary. In addition to these meetings, Matra also organised 17 others during the 3 years (once every 2 months) with user groups, mostly in the defence sector (Thomson, Dassault, the French Marine Force, Renault, etc.). Their purpose was to show the ‘maquette’, developed in parallel with the specifications and enhanced simultaneously, and to gather ideas for the specifications of the developed modules (In data processing, the maquette is conceived quickly. It then needs to set before it can be transformed into a product). As for VEDILIS, its partners formed two working groups: an electrical one with five partners and an optical one. Each group met about three times a year with a supervising directory. Lamp manufacturers worked with equipment manufacturers and exchanges were made every 2 months during the 3 years in a neutral place, at Germany’s Du¨sseldorf airport. VEDILIS resulted in four prototypes, each of which was developed independently, then integrated. Competitors developed the prototypes simultaneously and the best solution was selected. Exchanges between competitors were non-existent. Work was realised by functionality, not by technical solution. Consequently, each competitor was able to keep its own technical solutions even though all were obliged to communicate their results to each other. In R&D and technological development projects, individuals need to interact to develop new ideas, identify problems and seek solutions (Osborn et al., 1985). The intensity of these interactions can help create a common knowledge and language, and can even encourage the sharing of a strategic vision. As one of the characteristics of EUREKA consortia is task division, the number of meetings is a good indicator of the need for co-ordination. The frequency of meetings is often evoked in relations between subsidiaries and parent firms and in joint ventures as a means to create common managerial practices, which in turn accelerate organisational learning (Brown and Duguid, 1991; Inkpen, 1996). Interviews show that a high frequency of meetings is also needed to obtain a large number of outputs: new products, improved processes, doctorates, patents, licenses, publications and abilities. It seems that the more involved the consortium is in the upstream part of R&D, the more necessary it is to exchange ideas and establish a consensus on subjects that remain European Management Journal Vol 18 No 6 December 2000

obscure. The need to meet, however, is not as strong for product development; in fact, in this case, parallel or independent work by each partner preserves the characteristics of the end products and facilitates a separate exploitation of results by each partner.

Managerial Implications and Perspectives Through its study of individual partner firms’ motivations for collaborating in EUREKA consortia, this article analyses the different types of resources and competencies that firms are capable of extracting from R&D co-operation. The findings suggest that EUREKA R&D consortia have succeeded in providing an organisational structure where knowledge and competencies could be created. These issues are of particular interest because they can apply to all companies involved in technological partnerships. The main organisational features that favour an individual partner’s ability to create resources in a EUREKA R&D consortium seem to be: ❖ Organisational and managerial involvement appear to be as critical as financial involvement in the creation of resources. ❖ Strategic coherence with the partner’s business policy tends to favour resource creation. ❖ EUREKA projects have been more successful in strengthening firms that already have significant R&D activity in the consortium’s field. ❖ Strong internal capabilities lead to an increased creation of resources. Firms with significant existing in-house management, financial and technological resources and competencies benefit most from the collaboration. ❖ The firm’s role in the consortium influences both the quantity and the type of resources created: consortium leaders or technological integration managers seem to create significantly more resources than do the other partners. ❖ Finally, frequent meetings between partner firms in the R&D consortium are especially useful in resource creation for upstream research projects. All these issues lead to important implications for managers: ❖ This paper supports the argument that consortia are more effective in helping to improve and adopt technology rather than in long-term research. R&D partnerships deal with the adoption of new advances like prototypes or patents. ❖ If communication links are strong, resources are more likely to be created. The efficient collaboration emerges, not from formal structures, but 601

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❖

❖

❖

❖

rather from personal relationships and communication links that develop during the project. These relationships enable participants to define and pursue common professional interests. In many cases, the partners invested time and ingenuity in fostering such relationships. In fact, in more than 50 per cent of EUREKA projects, collaboration is based on a former partnership. When new technologies increase in complexity, their development requires that the firm acquire external capabilities to complement its internal ones used in new product development. R&D cooperation should be organised in such a manner as to gain access to complementary technologies and to competence-sharing consortia. A pre-commercial R&D consortium typically involves the sharing of sensitive information and knowledge. However, as the partners may sometimes be competitors, it is no surprise that in each consortium studied, stress related to the sharing and appropriation of the research results was expressed. Near-term applied research can incite participants to be more attentive to performance; as a result, they seek to obtain high returns on their contributions and to avoid the difficulties of translating basic research into products. According to our research, in order to maximise output and resource creation, an R&D consortium should be organised in such a manner that all members can be both responsible and autonomous, but are at the same time united by a cohesive structure. The success of such a structure requires that consortium managers be attentive to partner firms’ financial involvement and to their motivation to acquire competencies.

R&D consortia pose many dilemmas and contradictions. Consortia that focus exclusively on collective benefits will fail because the proprietary dimensions are not clearly defined; likewise, consortia that focus exclusively on individual benefits will not succeed because the collaboration philosophy is not well established. As technological co-operations continue to expand internationally and multiply at a rapid pace, all these issues pertaining to the successful management of R&D collaborations will become increasingly relevant. Globalisation certainly incites firms to form collaborations that are growing in importance due to both their international dimensions and their impact on each partner firm’s future.

2.

3. 4.

5.

6.

7. 8. 9.

10. 11.

Notes 1. The economics of collaborative research have received considerable attention, especially the organizational aspects. Previous research on R&D consortia has mainly focused on: (1) case studies of American cooperative R&D see (Peck, 1986; Ouchi and Bolton, 1988; Evan and Olk, 1990; Murphy, 1991; Gibson and Rogers, 1994; Browning et al., 1995); (2) industrial characteristics of part-

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icipants in cooperative R&D see (Link and Bauer, 1987; Kleinknecht and Reijnen, 1992); (3) evaluation of national programs; see (Peterson, 1993; Grindley et al., 1994); (4) analyses of the specificity of Japanese and American consortia; for SEMATECH, see (US General Accounting Office, 1992); for EEC projects, see (Ormala, 1993); for the UK Alvey Project, see (Grindley, 1988); for Japanese consortia, see (Fransman, 1990; Hane, 1994); (5) for comparing Japanese and American consortia, see (Aldrich and Sasaki, 1995; Corey, 1996; Ham et al., 1998). Throughout this article, a research consortium is broadly defined as an organizational form based on an agreement or contract between companies, public laboratories and/or Universities to share the expenses associated with an R&D activity. The sharing of the expected benefits requires a precise definition of the intellectual property rights. Launched in 1985 at the initiative of the French President Franc¸ois Mitterrand. Its aim is to promote scientific and commercial collaboration within Europe. Twenty-five countries belong to EUREKA as of 1999: the 15 countries of the European Union (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Luxembourg, Portugal, Spain, Sweden, UK), the Czech Republic, Iceland, Norway, Poland, Switzerland, Hungary, Romania, Russia, Slovenia, and Turkey, and the European Commission. National programs in Europe: if procedures for sustaining innovation exist, they are intended for individual companies and never specify that collaboration is a pre-requisite for public funding; European Union (EU) programs: it was not until the beginning of the 1980s that the idea of cooperating with competitors on applied research projects was accepted by industrial firms. An umbrella is a structure related to a specific field. They are mini-networks within the larger EUREKA network. Although they promote the use and development of standards, they do not have the authority to endorse projects or provide funding. There are 14 currently active umbrellas. See Ouchi (1989). According to the interview with M. Sand, formerly Head of Evaluations at the EUREKA Secretariat in Brussels. Evaluation of EUREKA industrial and economic effects (1993). We conducted this survey at the end of 1994 with the agreement of the EUREKA Administration through the French SOFRES polling institute. Data from the EUREKA/SOFRES questionnaire helped us to measure resource creation through empirical variables. Institutes, research laboratories, and university laboratories were eliminated from our sample, as their objective was generally to pursue fundamental research without the intention of commercially exploiting the results. The survey addresses member firms’ opinions about the resources and competencies resulting from already completed technological collaborations. Questionnaires in five European languages (English, French, German, Italian, and Spanish) were written and distributed to EUREKA project managers in 200 consortia, i.e. to 910 firms. The data were collected in most of the 22 countries participating in EUREKA. The response rate was 35 per cent, or 317 usable questionnaires. The question asked to managers (in charge of the consortium) was ‘Which of the following project outcomes would you say has benefited your company?’. Buckley and Casson confirm the importance of these characteristics concerning the involvement of partners in a cooperation.

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CAROLINE MOTHE, Paris X Nanterre, 200, av. de la Re´publique, 92001 Nanterre Cedex, France. Email: [email protected]

BERTRAND V. QUE´LIN, Groupe HEC Paris, School of Management, 78351 Jouy-en-Josas Cedex, France. E-mail: [email protected]

Caroline Mothe received a postgraduate degree from Paris Dauphine University, and holds a MBA of University of New York. She holds a Doctorate in management at Paris Nanterre University, where she is currently Maitre de Confe´rences. Her past experience in a consulting company is a strong background for teaching Strategy and Business Policy. Her research interests are mainly inter-firm co-operation and R&D Consortia.

Bertrand V. Que´lin is Associate Professor at HEC (Paris), and currently Associate Dean for the HEC Ph.D. Program. He teaches Industrial Economics and Strategic Management. His main topics of research involve economics of organisation, the strategic management of competencies, and outsourcing. He is the co-editor of a book Le Management Strate´gique des Compe´tences Paris: Ellipses, 2000.

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