Ex-ante Control Mechanisms against Opportunistic Behavior regarding Knowledge Sensitivity of Product (Comparative Case Study)

Abstract: There is an increasing interest for business organizations to engage into the global inter-firm alliance nowadays. The companies are striving for accessing the opportunities created by emerging markets, diversification of the products’ offer or the access to lower cost inputs (Barnes, et al., 2010). However, along with the benefits, there are also risks that the inter-firm alliances are challenged with. Those risks are represented by various forms of opportunistic behavior, which might be further caused by business partners (Williamson, 1975). The companies that decide to engage into inter-firm alliance need to invest in the implementation of control mechanisms that will protect them against opportunistic behavior. The preventing exante mechanisms can be implemented prior to the official start of cooperation while the cause ex-post mechanisms are applied during further stage of the collaboration. However, due to the cost of these implementations, companies cannot afford employing every available control mechanism. They need to select only the ones that their benefits exceed their costs. One of the main factors that influence the selection process of control mechanisms is the level of knowledge sensitivity of a product. The main objective of this master thesis is to determine how the level of knowledge sensitivity of a product influences the selection of ex-ante control mechanisms.