Abstract
In recent decades, new product development (NPD) activities are becoming increasingly important and attracting more practical and research attention. Researchers with different backgrounds tend to analyze NPD problems with different theories and methodologies, among which contract theory is one of the most popular. Nevertheless, as NPD activities are highly innovative and fast evolving, common theories need to be adjusted so that can adapt to emerging challenges. This thesis focuses on the implementation of contract theory on solving two emerging NPD challenges: (i) multilateral collaboration structure and (ii) the implementation of new technology. Our first chapter focuses on the contract design for a multilateral NPD collaboration. We model a multilateral NPD collaboration within the principal-agent framework and analyze the strategic interplay between parties under different contractual terms. In contrast to bilateral NPD collaboration, we find it is more difficult to align incentives between parties in multilateral NPD collaborations by identifying two distortions: innovation distortion and production distortion. The role of royalty payments in multilateral collaborations is also different from that in bilateral collaborations. We also examine the use of tied royalties to mitigate the two distortions. Our second chapter focuses on the impact of new technology implementation on new content development (NCD) collaborations. We model an NCD collaboration to analyze the economic tension behind NCD: Content development, licensing and distribution, and product line design for information goods. We especially focus on the asymmetric information problem in the collaboration. We show that although the product line design aligns with the social optimum, the NCD supply chain is never coordinated due to moral hazard and asymmetric information. We find that asymmetric information is mitigated only when the less informed party plays a significant role in the collaboration. We also find that royalty payments can serve as a signaling mechanism to mitigate asymmetric information, while sign up fees serve to guarantee the credibility of the signal.