A Bounded Commitment in Vertical Collaborations of New Product Development

Ge Zehui (), Ren Zhengkun (), Hu Qiying () and Jia Yiheng ()
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Ge Zehui: School of Economics and Management, University of Science and Technology Beijing, Beijing100083, China
Ren Zhengkun: School of Economics and Management, University of Science and Technology Beijing, Beijing100083, China
Hu Qiying: School of Management, Fudan University, Shanghai200433, China
Jia Yiheng: School of Economics and Management, University of Science and Technology Beijing, Beijing100083, China

Journal of Systems Science and Information, 2021, vol. 9, issue 2, 154-174

Abstract: Uncertainty is a main source of opportunistic behaviors in research and development cooperations, which challenges strategic decisions ranging from investments to operations. To avoid opportunism arising in cooperations, commitments (either formal contracts or informal communications) are generally made in advance by members of an alliance. However, how does a commitment encourage R&D investments and ultimately enhance the total performance, without loss of flexibility in ex post operations? This study attempts to answer this by investigating a bounded commitment in the context of vertical collaborations in a supply chain. In this exploratory study, a 3-stage game model is used (by backward induction) to examine a two-echelon supply chain under a bounded commitment in NPD. Our analysis shows that upstream R&D investment is stimulated more and that both members are better off under the bounded commitment. At the same time, when the relative bargaining power between the supplier and the manufacturer falls into an appropriate area, it is possible to reach a bounded commitment, and the manufacturer is more sensitive to this relationship. Finally, the bounded commitment restrains opportunistic behaviors, but there is no strong sign that an increase in the ratio of the order outside the chain to the inside one can make firms better.

Keywords: new product development; R&D cooperation; supply chain management; commitment; opportunistic behavior (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:9:y:2021:i:2:p:154-174:n:5

DOI: 10.21078/JSSI-2021-154-21

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