The R&D boundaries of the firm: a problem solving perspective

This paper considers, theoretically and empirically, how different organization modes are aligned to govern the efficient solving of technological problems. The data set is from the Chinese consumer electronics industry. Following the problem solving perspective (PSP) within the knowledge-based view (KBV), we develop and test several PSP and KBV hypotheses, whilst controlling for some relevant transaction cost economics (TCE) and other variables, in an examination of the determinants of the firms’ R&D organization choice. The results show that a firm’s existing knowledge base is the most important explanatory factor. Problem complexity and decomposability are also found to be important, but it is suggested, contrary to the view of PSP, that they are better treated as separate variables, and that equity-based alliances tend to be reserved for the most complex problems.