Page 13 - 33-2

NTU Management Review Vol. 33 No. 2 Aug. 2023

2. Literature Review

In recent years, issues related to information goods have been widely concerned (Aral
and Dhillon, 2021; Chellappa and Mehra, 2018; Dou, Hu, and Wu, 2017; Liu, Hung, and
Hsiao, 2019; Zhang, Nan, and Tan, 2021). For digital goods, making online advertorials
is one of the most important income sources. While some previous works investigate

the word-of-mouth effect (see, e.g., Abubakar and Ilkan, 2016; Litvin, Goldsmith, and
Pan, 2008), some discuss how the content of an advertorial should be designed. It is
documented that consumers are typically defensive when viewing an advertorial (Darke
and Ritchie, 2007). Therefore, some researchers suggest creators truthfully provide
negative comments when producing an advertorial (see, e.g., Hwang and Jeong, 2016).
However, the contracting issue, which is the main focus of our work, is missing in this
stream of literature.

Our paper also relates to revenue sharing for the production of digital goods/
services. Sun and Zhu (2013) examine how the launch of an ad-revenue-sharing program
would affect the behaviors of bloggers. Their results show that with such a revenue-
sharing system, bloggers tend to provide higher-quality content and devote themselves
to more popular topics. Bhargava (2021) develops an analytical model in which a
platform aggregates plenty of content created by multiple producers into a bundle and
shares its revenue with the producers. He investigates demand, production choices, and
revenue-sharing arrangements in a cross-producer bundle economy. Jain and Qian (2021)
analytically study how a revenue-sharing contract between a monopoly digital content

platform and several independent producers would be affected by multiple factors,
including the nature of competition among various producers, the size of customer base,
and the type of customers. These studies indicate that revenue sharing is a popular contract
format for digital content creation. We add to this stream of literature by investigating the
revenue-sharing relationship between an MCN company and creators on video-sharing
platforms.
The contracting issue between an MCN company and a creator is similar to the

traditional salesforce compensation problem (Lal and Staelin, 1986; Rao, 1990). Contract
design with respect to an agent who privately exerts costly effort has been studied in the
context of channel coordination (Taylor, 2002), threshold incentives (Sohoni, Chopra,
Mohan, and Sendil, 2011), and demand forecasting (Chen, 2005; Kung and Chen, 2014).
Nevertheless, to the best of our knowledge, there is no work dedicated to the contract

5