The Research On The Bilateral Moral Hazard Of Biopharmaceutical R&D Enterprises In The Initial Stage

With the integration of biotechnology and modern medical technology, biologicalmedicine industry showed vigorous development momentum in recent years, and has attractedmany researchers in the the key links of medical industry chain-R&D. However, due to itsown features, biological pharmaceutical R&D enterprise in early-stage will seek ventureinvestors. However, bilateral moral hazard problem will affect the efficiency of cooperationbetween investors and entrepreneurs. Because of the uncertainty of the environment and theincompleteness of contract, the responsible main body can’t bear all losses and cannot enjoythe interests of all alone, so they do not bear all the consequences of their action. That is thebilateral moral hazard.How to avoid the bilateral moral hazard is the article researchpurposes.This paper uses the incomplete contract theory and the model of transfer control,combining with many cases, to analysis the bilateral moral hazard of biomedical R&Denterprises. The article first analysis biological pharmaceutical R&D enterprise characteristicand manifestation of bilateral moral hazard; Secondly we analysis the cause of biologicalpharmaceutical R&D enterprise bilateral moral hazard, and using the control as thebreakthrough point, analysis the relationship between control and bilateral moral hazard;Finally, based on the perspective of contingent control, standing on the ground of investors,we put forward countermeasures of the biological pharmaceutical R&D enterprise bilateralmoral hazard in order to defeated work together more.According to the article, the biological medicine industry features high technology,high risk, long cycle and in a start-up stage,biomedical R&D companies also face higherfinancing demand characteristics and a high degree of information asymmetry. From theAngle of human capital, biological pharmaceutical R&D enterprise entrepreneurs’humancapital has not transferred, strong human asset specificity, difficult supervision and in no otheralternative. So biological pharmaceutical R&D enterprise in early-stage often seek ventureinvestors. Once the participation of the risk investor, because the person is limited,they cannot be completely rational. So the investment agreement is uncompleted, control rights isparticularly important. According to the article, they have to choose the right control structure to circumvent the bilateral moral hazard for the early-stage biomedical R&D companies.Control rights is affected by the effort level, the trust level between investors andentrepreneurs, biological pharmaceutical market outlook and the effect of supervision.Moreover, contingent control is the best control configuration. Therefore, based on theperspective of contingent control, use the issuance of convertible securities, stage financialstragety and into the board of directors with disproportionate voting rights are the institutionalarrangements to circumvent the bilateral moral hazard.