Optimal contracts of production personnel’s innovation based on slack resources

Heping Zhong

COMPUTER MODELLING & NEW TECHNOLOGIES 2014 18(4) 164-171

School of Management, Xuchang University, Xuchang, 461000, Henan, China

Based on the analysis frames of the multi-task principal-agent model, this paper establishes a principal-agent model of production personnel’s innovation based on slack resources and obtains the optimal incentive contracts for production personnel while they are engaged in “production task” and “slack innovation” through the analysis of the model. In order to improve the performance of production personnel’s “slack innovation”, on one hand, the firm can reward their “slack innovation” according to the optimal incentive contracts; on the other hand, the firm can optimize the incentive contracts for their “production task” according to the interdependence of the cost functions of “production task” and “slack innovation” to promote indirectly the performance of “slack innovation”. The originality of this paper is not only examining the multi-task problems of the compensation incentives for production personnel’s “slack innovation” but also considering the impacts of the firm’s active actions to support the production personnel’s “slack innovation” on incentive contracts.