Abstract: Moral hazard is the main factor obstructing the scale enlarging and efficiency improving in collaborative innovation. In this paper, a game model of collaborative innovation with venture capital fund of funds is developed, in order to study how the innovation fund use revenue sharing mechanism and investment policy to raise the investment from enterprise and innovation supplier, as well as performance of collaborative innovation. The optimal revenue sharing mechanism and the investment policy of fund are obtained through theoretic and numerical analysis. It is found that the fund should give the whole revenue share ratio to the enterprise, while the fund and the innovation supplier should claim a fixed revenue from enterprise to motivate the enterprise to make commitment according to contract; and the fund should give the innovation supplier the investment as late as possible, while the innovation supplier invests its own capital at earlier stages, in order to stimulate it to raise innovation commitment, as a result the expected profit of the fund is maximized.

Key words: collaborative innovation, revenue sharing, investment policy, venture capital fund of funds