Abstract: This study uses a three-level principal-agent model of central government (principal)-intermediate government (manager)-local government (agent) to construct a theory of control rights in governance. By designing various governance contracts, we first translate governance modes into allocations of goal-setting rights, incentive distribution rights, and inspection and assessment rights, and then analyze the mechanisms of choice and conditions of change in governance modes. The study provides a detailed description of three typical governance modes of tight-coupling, administrative-contracting, and loose-coupling. Minimization of organizational cost is taken as the standard to find the optimal contract and its corresponding organizational cost expression under each governance mode. Through numerical simulation technology, we calculate and compare the cost of each governance mode under the complete task attributes combination and then obtain the optimal governance mode selection rule for different task attributes. We find that the three task attributes (implementation difficulty, inspection difficulty, and task risk) and the corresponding cost-benefit tradeoff calculation determine the organizational cost of different governance modes, thereby affecting the selection of the optimal governance mode. The tight-coupling mode is generally suitable for tasks with high risks, the administrative-contracting mode prefers tasks with high implementation difficulty, and the loose-coupling mode has cost advantages over tasks with low inspection difficulty. This study expands the control rights theory and its application into the field of governance. It offers a unified framework of China's governance process and a credible explanation of the different governance modes in existence.

Key words: control rights, governance modes, organization cost, task attributes