A Contract Between The Members Of The Virtual Enterprise Enterprise And Incentive

In the latter half of the 20th century, the traditional manufacturing mode with single product in enormous quantities seemed to lose its ability to fit the demand of market, with the application of new technology, especially the computer technology and information technology, and with the more and more fierce market competition. To deal with this condition, enterprises began to look for new breakthrough on organization structure.The development of technology happened to cater to enterprises' requirement. Various of new manufacturing technologies and information technologies offered the technological support to reform the forms of contracts. The essences of these manufacturing technologies are quite similar, although they are different in concept and practical operation in detail. The similarities are that they are all some kinds of innovation against the traditional extensive single producing mode, that they all adopt more automatic and more flexiblt producing mode, and that they all try to reduce the level of " capital specificity " and information asymmetry, in order to reach the different degree of the production, which in turn aims to fit the market well.With more and more need for breakthrough in organizational structure and the more and more maturity of technology, virtual organization began to boom in some area and within some industries.This paper offers primary discussion about the contract relationship among the member firms within a virtual organization, in the angle of contract economics. According to the analysis structure of contract economics, the important factors influencing the forms of contract governance include the capital specificity and the level of information maturity. This paper builds a virtual organization contract modelwith the variables reflecting the capital specificity and information asymmetry, based on the principal-agent model. Through this model, the paper discusses the risk share and stimulant contract issue between the core firms and peripheral firms within a virtue organization.The first part is a review of relative research on virtue organization, after the discussion of basic conception on different angles.The second part focuses on the organization feature and contract characteristics about virtual organization. The essence of the contract is a kind of bilateral governance contract.The paper builds a basic model on the condition of perfect information in the third part, in which we find the conclusion about the contract enactment and risk shares.. The fourth part extends the model built in the above part, and modifies the variables of imperfect information and capital specificity. In this part, we discuss the difference of the risk shares between the principal side and the agent side, and the stimulant amount, on the condition of imperfect information and capital specificity.Based on above analysis, we focus on the difference between the model in imperfect information and the one on perfect information. The conclusion is that capital specificity and imperfect information are important reasons for the existence of contract risk.The fifth part, the last one, summarizes current technologies in virtual organization to decrease capital specificity and imperfect information and their application in practice.