Abstract: Cooperative innovation is the key method for modular manufacturing of Complex Product System (Short for CoPS).However,there could be moral hazard by cooperative units that will damage project value on the process of modular research ascribe to payoff externality and private monitoring.Based on the constructing and analyzing of incomplete contract incentive model,this paper explors the motivating restriction mechanism effectiveness for cooperative units in module outsourcing and jointly developing.It states that in module outsourcing model,the cooperative units do not have to undertake systematic integrated risk so punishment and complete competing couldn't inhibit moral hazard.What's more,jointly developing model may internalize payoff externality to guarantee the effectiveness of cooperative innovation in order to avoid the risk mentioned above.

Key words: Complex Product System(CoPS), cooperative innovation, payoff externality, moral hazard