The Allocation Of Control Rights In Supply Chain In R&D Outsourcing Scenario Based On Incomplete Contract

Along with the development of reform&openness and global economic integration, all of the enterprises are suffering from more and more competition pressures, and only through constant innovation to drive their business continues to grow. However, the traditional pattern of "closed innovation" couldn’t adapt to the market changes, on the one hand, it firmly hinder the R&D process timeline, on the other hand, it has brought a higher R&D costs and more risk, and it makes the enterprises unable to cope with the increasingly fierce market competition.Research and development outsourcing———this kind of new innovation model based on "open innovation" background emerges at the historic moment.In today’s China, with the development of R&D outsourcing, more and more companies began to choose some important research and development business (such as new products’design and development) to outsource to other organizations (especially the supply chain partners), and take advantage of this dynamic open innovation model to participate in the globalization competition actively. Although R&D outsourcing has become a widespread phenomenon in many industries, but the outsourcing companies are always faced with all kinds of costs and risks caused by the incompleteness of contract in the operation process. Although lots of literatures has given the explaination and management measures to the increasing R&D outsourcing phenomenon and risks prevention, but few scholars try to design the R&D outsourcing coordination mechanism in supply chain on the basis of the theory of incomplete contract. So this paper puts forward R&D outsourcing risk management mechanism in supply chain based on the incomplete contract by reviewing previous research results, and takes advantage of the incomplete contract theory and game theory to build the mathematical model of R&D outsourcing in supply chain based on incomplete contract, besides we want to find out the optimal R&D outsourcing coordination mechanism in supply chain by comparing two different ways for control rights configuration. This paper’s research conclusions as follows:First, after the entrusting party and the entrusted party signed the R&D outsourcing contract, in the case of the control rights configuration, the entrusting party will set a higher control rights when the incompleteness of contracts is becoming more and more obvious, the efforts of the entrusted party will be rising after falling, the supply chain’s profits and the entrusting party’s profits will be unchanged after falling, but the entrusted party’s profits will be falling after rising; Without control rights configuration, however, the entrusting party will set a higher proportion of revenue sharing when the incompleteness of contracts is becoming more and more obvious, the efforts of the entrusted party will be falling, the supply chain’s profits and the entrusted party’s profits will be rising, but the entrusting party’s profits are falling.Second, in the case of the control rights configuration, adjusting the wholesale price also can produce the same implementation just as control rights function (namely, it can enhance the efforts of the entrusted party), but their mechanisms are different, the former encourages the entrusted party to do right things by given profits, while the latter prevents the entrusted party’s bad behaviors by controlling of the extra income, and adjusting of the wholesale price also can help to enhance the supply chain’s profits; Without control rights configuration, however, adjusting the revenue sharing proportion can encourage the entrusted party to raise the level of R&D efforts, but the entrusting party’s revenue sharing proportion will be rising when the incompleteness of contracts is becoming more and more obvious, it means that the entrusting party will give up the rights to stimulate the entrusted party to improve the level of R&D efforts in order to protect its own interests, and revenue sharing mechanism is "failure".Third, the supply chain’s profits under optimal control rights are superior to the complete control situation, but inferior to the situation where without control rights. The entrusting party’s profits under optimal control rights will be superior to the situation where without control rights and complete control. Besides, the supply chain’s (the entrusting party’s) profits under optimal control rights will be equal to the supply chain’s (the entrusting party’s) profits under complete control when the incompleteness of contracts is becoming more and more obvious.Fourth, in the case of the control rights configuration and without control rights configuration, the optimal efforts level is increasing function about demand degree coefficient, is decreasing function about effort cost coefficient, and the supply chain’s profits&the entrusting party’s profits&the entrusted party’s profits are all different in both of the situations where control rights configuration and without control rights configuration.