The effectiveness of relational and contractual governance in new product development collaborations: Evidence from Korea

• We study the governance and outcomes of NPD collaborations in South Korea.
• Strong prior business ties enhance shared governance and collaboration outcomes.
• Shared governance enhances collaboration outcomes more strongly than contractual safeguards.
• Relational and contractual governance are substitutes as regards satisfaction.

This study provides deeper insights into the management of new product development (NPD) collaborations and a better understanding of the ways that companies in East Asia govern these relationships to acquire external knowledge while achieving collaboration satisfaction. Looking through the lens of the relational view, we disentangle the effects of relational and contractual governance on collaborations outcomes. An analysis of survey data from 119 NPD collaborations in South Korea reveals that the strength of prior business ties between partners enhances relational governance and indirectly contributes to knowledge acquisition and collaboration satisfaction. Contractual governance does affect collaboration outcomes, but the impact is weaker than relational governance. The positive returns on collaboration satisfaction are diminishing when both governance mechanisms are applied simultaneously. The findings further suggest that managers engaged in NPD collaborations in East Asia should invest more in relational governance while maintaining a moderate level of contractual safeguards to enhance collaboration outcomes.