R&D outsourcing contract for the unverified value of tacit knowledge sharing

Abstract

Purpose: The purpose of this paper is to provide a R&D outsourcing contract design framework to incent R&D outsourcing service providers sharing tacit and explicit knowledge. Design/methodology/approach: The author uses the principal-agent theory to builds multitask principal-agent model which focuses on two cases. One case is that the effort costs of explicit and tacit knowledge sharing are complementary, but another is the effort costs are substitutable. Findings: It was found that when the effort costs of explicit and tacit knowledge sharing are mutually complementary the multitask R&D outsourcing contract can incent tacit knowledge sharing. Moreover, the multitask R&D outsourcing contract can motivate the effort of explicit knowledge sharing to achieve system optimization, but it fails to motivate the effort of tacit knowledge sharing to achieve system optimization. Research limitations/implications: In this paper we only consider that the outsourcing relationship is short-term, so the multitask R&D outsourcing contract is formal. In fact, the outsourcing relationship may be long-term, so the multitask R&D outsourcing contract is informal. In the long-term cooperation the buyer can promise some reward which cannot be verified by court. service providers choose to trust the promise of the buyer first. Once the buyer don’t fulfill the promise, they not only lose the trust of service providers in this cooperation, but also lose social trust and are seen as dishonest enterprises. Practical implications: Our study provides a theoretical model for formulating an effective R&D outsourcing contract and promoting the transfer of explicit and tacit knowledge sharing. Originality/value: The paper extends prior literature by designing multitask R&D outsourcing contract to share the tacit knowledge. We not only consider the cost of substitution relationship between tacit knowledge and explicit knowledge, but also considered the cost of complementary relationship.