This paper investigates R&D cooperation between buyers and suppliers, drawing both on transaction cost theory and resource-based theory of the firm. Results of logistic regression analyses, using a unique firm-level database containing 689 manufacturing firms located in a Dutch region, support assumptions of transaction cost theory. Frequent knowledge transfer and moderate and high levels of asset specificity increase probabilities of R&D cooperation. In particular, Williamson's assumptions concerning the moderating influences of uncertainty on bilateral governance are confirmed. Extending the original transaction cost model with indicators derived from resource based theory of the firm increases the performance of the model.