Analysis On Option Of Value For Supply Chain Collaboration And Choices Of Option Contract

With the speeding changes of marking and the more and more complicated technology of the products, the mode operation that the traditional manufacturer is responsible for products (including spare parts) development, machine manufacturing and system integration and the supplier is responsible for parts manufacturing will lead the manufacturers to face significant business risks. In order to reduce business risks and make the supplier’s technical and resource advantages well, manufacturers have begun outsourcing resources from parts manufacturing to product components and system developments. Therefore, collaboration of product development has changed from the same internal team to the manufacturer-centric collaboration between organizations, multi-organizational collaborative product development. The model of participating to the supplier includes the manufacturer new product development, benefit and efficiency of supply chain, and derives the problem about the mutual collaboration in partners and exit mechanism at the same time.The motivation of Suppliers’ involvement is not only supply the systems and components it undertaken in the collaborative development exclusively (or priority) to the manufacturer to achieve the desired net present value of earnings, the benefits of this investment behavior to suppliers also include improve their innovative capacity, competitiveness, product quality, and financial performance, which can be seen as the strategic value of the investments for suppliers involvement. From the supplier point of view, this paper describes supplier’s participation in real options value, identifies the flexible option and the incremental option for the supplier involve in new product development, describes the options characteristics of supplier involvement. This research can help managers to assess the future value when involve in the collaborative R&D projects correctly, including the real options value.Based on recognizing two forms of exit mechanism which are collaboration terminate jointly and unilateral between enterprises in supply chain, using real option theory, analysis the anticipated project value of every participations by different exit mechanism. Research conclusion shown, the option behavior of project terminate jointly is endogenous in project, and every participant will get benefit through made the partners’ agreement consistency, and this emphasized the collaboration nature of partnership. Collaboration terminate unilateral is an uncooperative behavior, it will make loss of partner’s benefit and reduce the project’s overall value.