The paper analyzes the optimal allocation of the R&D property right in an incomplete contract framework. This paper argues that the integrated cases are inefficient when both investments are complementary. Furthermore, the optimal allocation of the R&D property right only depends on the relative important of investment in production process. When research unit's investment is important relative to the firm's, the research unit should own large share of R&D property rights, whereas firm obtain small share of R&D property rights. Our analysis also provides an empirical model to future studies especially in the management of technology.