Incentive Mechanism Design For R&D Alliance With Technological Uncertainty, Spillover Effect

Research and development (R&D) is an enterprise's key source for obtaining core competitiveness and sustainable development. There are three R&D modes, including independent R&D, acquiring from external technology market, and R&D alliance. With the acceleration of technological change, shortening of product life cycle and intensification of market competition, it is becoming increasingly difficult that an enterprise does R&D relying solely on its limited internal resources, as a result, R&D alliance has become more and more enterprises'preferred approach to do R&D.Cooperative R&D has the advantage of being able to share resources, costs and risks, form synergies, know or control partners'technology, market and product, influence market competition, obtain funding and policy support from government. However, 60% of alliances ended in failure within 6 months after establishment. In China, the success rate of alliances is only about 50%. As moral hazard and profit sharing are the key factor causing the instability of R&D alliances, if we can design and incentive mechanism, through choosing a reasonable profit-sharing arrangement to motivate members of R&D alliance, to voluntarily give up opportunism, the efficiency and competitiveness of R&D alliances will be greatly enhance.In view of existing situation that moral hazard and unfair profit sharing cause low efficiency and high failure rate of R&D alliance in China, this paper studies how to design a practical incentive mechanism, through choosing a reasonable profit-sharing arrangement and alliance structure, to prevent moral hazard in R&D alliance, stimulate members of alliance to reveal their private information truthfully and enhance R&D investment or commit enough efforts, as a result, the cooperative R&D becomes successful. The conclusions of this paper are supposed to be a theoretical guidance for the strategy- or policy-making of enterprises, universities, research institutions and government.The main research contents of this paper are as follows.â‘ Incentive mechanism design for intra-industry R&D allianceThis part is composed of Chapter 3, incentive mechanism design for intra-industry R&D alliance with technological uncertainty, and Chapter 4, incentive mechanism design for intra-industry R&D alliance with spillover effect. It is studied that the members'investment polices under different market conditions, alliance structures, including parallel R&D alliance and jointed R&D alliance, and profit-sharing arrangements, including equal profit-sharing arrangement and proportional profit-sharing arrangement, under the condition of technology uncertainty and spillover effect in R&D, as well as the effect of input spillover, alliance structure and profit-sharing arrangement on members'investment policies. The optimal profit-sharing arrangement and alliance structure for different external condition are found, which can be used as an incentive mechanism to prevent moral hazard.â‘¡Incentvie mechanism design for R&D outsourcingThis part is composed of of Chapter 5, incentvie mechanism design for R&D outsourcing with technological uncertainty, and Chapter 6, incentvie mechanism design for R&D outsourcing under asymmetric information.In Chapter 5, under the assumption that there is technique uncertainty in R&D, and the success probability of R&D and market return is relative to individual resource committed on them, it is studied how to use profit sharing arrangement as incentive mechanism to prevent moral hazard in R&D outsourcing. The willingness to cooperate and commitment policies of both outsourcer and supplier with fixed sharing arrangement, proportional sharing arrangement, or mixed sharing arrangement are investigated, and the mix sharing arrangement is improved, furthermore, the optimal profit sharing arrangement for different condition is found out through theoretical analysis,under which the probability of R&D outsourcing and the profit of both outsourcer and supplier will be raised. Finally, a numerical example is given to analyze the effect of market returns and distribution proportion on the optimal profit sharing arrangement, as well as the commitment policies and profits of both sides.In Chapter 6, it is studied that how to use profit sharing arrangement as an incentive mechanism to stimulate both sides of R&D outsourcing to reveal their private information and make enough effort or commitment. First, it is proved that there is double-sided moral hazard in R&D outsourcing under fixed, proportional or mixed profit sharing arrangement. Subsequently, under the suggestion that the outsourcer should transfer the salvage value of R&D investment to the supplier as a payment or paid commidity, an improved mixed profit sharing arrangement is proposed, composed of a fixed transfer payment and proportional sharing, which is proved to be able to prevent double-sided moral hazard, and stimulate both sides to reveal their private information and make enough effort.â‘¢experimental study on incentive mechanism design for R&D alliance This part is Chapter7. In this part, using the theory of experimental economics, the experimental enviroment is established according to the game model of parallel R&D alliance under equal profit-sharing arrangement and spillover effect. By designing and doing laboratory experiment, and comparing the activities of human being under the condition of the model with the predictions of the model, the reliability and effectiveness of theoretical solution is tested.The theoretical and methodological innovations of this paper are as follows.â‘ Different from the existing literature applying principal-agent theory to design the optimal contract under moral hazard, which just puts forward the general characteristics of the optimal contract, this paper answers why there are different contracts in the similar context of reality, and whether there is a better contract and suchlike questions. Under this basis, this paper designs the practical and feasible incentive mechanism to promote the success of cooperative R&D by comparing and improving those actual cooperation models in reality, including the profit sharing arrangement and alliance structure, from which choosing the optimal cooperation model.â‘¡Different from the existing literature in incentive mechanism design for R&D outsourcing, in which there just exists single-sided moral hazard form the supplier, in this paper, under the consideration that both the outsourcer and the supplier will adopt opportunism, reducing R&D investment or efforts, and reveal false private information, it is studied that the incentive mechanism for R&D outsourcing with double-sided moral hazard and technological uncertainty, which is used to stimulate both the outsourcer and the supplier to give up opportunism.â‘¢Different from the existing literature, in which it is studied how to solve moral hazard or adverse selection in R&D outsourcing, in this paper, under the consideration that both the outsourcer and the supplier will adopt not only hidden action but also hidden information, it is studied how to design a reasonable profit sharing arrangement for R&D outsourcing with asymmetric information to prevent the hidden action and hidden information from the outsourcer and the supplier, in other word, solve double-sided moral hazard and double-sided adverse selection simultaneously.