Managerial control systems and innovation partnership success: an empirical analysis in Italian firms

This study analyses the link between product/service innovation, partnerships and Managerial Control System (MCS). Particularly, it aims to analyze empirically the role of MCS in supporting the innovation partnership successful functioning and management. The sample of this study consists of 106 Italian manufacturing firms belonging to the sectors of the Italian economy with the largest number of registered patents according to the European trend chart on innovation. The results show that MCS may play a key role in reducing risks and lowering the likelihood of failure of innovation partnerships. Particularly, we found a positive correlation between the use of informal control mechanisms and a partnership’s successful performance. Moreover, among informal control, our findings show that trust is the only true informal mechanism that can guarantee a successful collaboration. The results of this study may offer relevant implications for practitioners. With regard to the control of the partnership’s activities, the initiatives and creativity of those who are actively involved in the innovation process should not be inhibited; therefore, stifling them with strict rules and procedures would be ineffective but if a firm is not willing to give up formal control mechanisms altogether because it does not believe that a trust-based coordination is sufficiently reassuring, it should opt for “weak”, albeit formal, control mechanisms based on a shared production and management of plans and reports, thus ensuring a perfect information symmetry among different partners. Notwithstanding the different opportunities provided by partnerships and strategic alliances to support there is a growing body of evidence of a high failure rate in such organizational forms. One of the causes cited in the literature is the high level of risk associated with alliances as compared to internal development of innovation. The risks mainly arise from the difficulties to obtain cooperation with partners that might have different objectives, and from the potential opportunistic behavior of some of the partners. This is particularly true in innovation networks where the uncertainty of producing an interesting result is very high and the investments that the partners make are considerable. In this context, management control systems (MCS) could play a relevant role in reducing the risks and decreasing the likelihood of failure