The organization of research corporations and researcher ability

Abstract

This paper analyzes the formation of Research Corporations as an alternative governance structure for performing R&D compared to pursuing in-house R&D projects. Research Corporations are private for-profit research centers that bring together several firms with similar research goals. In a Research Corporation formal authority over the choice of projects is jointly exercised by the top management of the member firms. A private for-profit organization cannot commit not to interfere with the project choice of the researchers. However, increasing the number of member firms of the Research Corporation reduces the incentive of member firms to meddle with the research projects of researchers because exercising formal authority over the choice of research projects is a public good. The Research Corporation thus offers researchers greater autonomy than a single firm pursuing an identical research program in its in-house R&D department. This attracts higher ability researchers to the Research Corporation compared to the internal R&D department. The paper uses the theoretical model to analyze the organization of the Microelectronics and Computer Technology Corporation (MCC). The facts of this case confirm the existence of a tension between control over the choice of research projects and the ability of researchers that the organization is able to attract or hold onto.