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To purchase or authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1540-5885.2009.00334.x Byline: Petra M. Bosch-Sijtsema (1), Theo J. B. M. Postma (2) Abstract: This paper is concerned with how firms in a project-based industry cooperate in technological innovation projects in the construction industry. The main focus of the paper is on the sharing of capabilities in cooperative innovation projects and how these cooperations are governed. A knowledge-based perspective is applied, and four cooperative innovation projects in the construction industry are compared. Based on the case studies, a set of propositions is defined. First, a cooperation aimed at a mutual strategic benefit in mutually gaining access to the knowledge bases of the involved firms, while maintaining their own differentiated knowledge base, can result in more stable and long term relationships with mutual trust between the cooperating firms. Second, in a cooperation aimed at a mutual strategic benefit in mutually gaining access to the knowledge bases of the involved firms, partners not only gain access to each other's technological capabilities but also develop and share knowledge about organizational aspects and market situations and gain knowledge about the way of working of the partner firm. Third, in a cooperation aimed at mutual strategic benefit in mutually gaining access to the knowledge bases of the involved firms, noncodifiability of the capabilities is conditional to create a win-win situation. And fourth, cooperation aimed at a mutual strategic benefit in mutually gaining access to the knowledge bases of the involved firms is based on mutual competence and intentional trust as its main governance mechanism, whereas contracting between market parties aimed at knowledge-output transactions is represented by limited trust and arms' length (contractual) relationships as its main governance mechanism. Author Affiliation: (1)Helsinki University (2)University of Groningen Article note: Address correspondence to: Petra M. Bosch-Sijtsema, Helsinki University of Technology, Faculty of Industrial Engineering and Management, Laboratory of Work Psychology and Leadership, Otaniementie 14, 02015 TKK Espoo, Finland. Tel.:+358-50-9295890. E-mail: Petra.Bosch@petrabosch.com.