Contracting for new product development

• Main Authors: HASIJA, Sameer, BHATTACHARYA, Shantanu
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2016
• Subjects: Operations and Supply Chain Management; Technology and Innovation
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/5437; https://doi.org/10.1007/978-3-319-32441-8_7
• Institution: Singapore Management University

In this chapter, we outline the findings of the research on contracting in new product development from the perspective of mitigating agency issues in both the internal and external contexts to the firm. The literature has studied the role of contracting in aligning the incentives of both internal stakeholders and external partners, and the nature of decisions being made by the principal. A common set of agency issues studied in the literature is the use of contracts for coordinating single or multiple efforts to attain higher profits for the supply chain, and the division of profits between the different partners in the supply chain. Additionally, the mitigation of information asymmetry effects, the decision rights for exercising contracts, group and individual incentives, different contracting levers and monitoring of agent efforts have also been considered. Finally, simultaneous versus sequential decision-making, the use of informal contracts in addition to formal contracts, and the impact of risk profiles have been studied. We also identify critical gaps in the literature and propose directions for future research.