Study on incentive and supervision mechanisms of technological innovation in megaprojects based on the principal-agent theory

Abstract

PurposeThe high uncertainty of technological innovation in megaprojects brings great challenges to the R&D institution and also acts as a trigger for moral hazard. The incentive and supervision are effective means to improve the performance of innovation. The purpose of this paper is to propose appropriate incentive and supervision mechanisms to reduce information asymmetry and improve the efficiency of incentives. Suggestions on technological innovation are put forward to megaprojects management.Design/methodology/approachAccording to the principal-agent theory, the research develops incentive models under three states, i.e. information symmetry, information asymmetry and information asymmetry based on supervision mechanism. The Bayesian theory is employed to prove the effectiveness of the novel supervision method based on risk assessment.FindingsThe results indicate that under the information asymmetry, the incentive intensity is positively correlated with the social benefits coefficient, and negatively correlated with the patent benefits coefficient. The R&D effort and the owner's incentive intensity decline with the increase of information asymmetry. The supervision of risks can effectively reduce the degree of information asymmetry, and the higher the uncertainty of innovations, the more significant the effect of supervision is. As the supervision intensity increases, the incentive intensity, the R&D effort and the innovation output will increase. In addition, the R&D institutions with high innovation capability, low unit cost of R&D and low risk-aversion are more willing to make efforts to innovate.Originality/valueThis study fills the research gap on incentive and supervision of technological innovation in megaprojects. The externality of innovation benefits is considered in the model. The traditional incentive model is extended through the introduction of supervision. Furthermore, a novel supervision method based on risk assessment is proposed. The results validate the importance of risk management in technological innovation and provide a new insight for project management.