Blockchain development in a supply chain with rival entry

Abstract

We investigate the impact of rival entry on blockchain technology development by modelling a supply chain, in which an incumbent manufacturer (she), facing the entry of an entrant manufacturer (it), develops the blockchain platform through investments to improve the traceability and transparency of products procured from one supplier (he). Our study shows the rival entry (competition) may not necessarily promote blockchain technology adopted by the incumbent manufacturer, whether the blockchain platform is permissioned or non-permissioned. Furthermore, the entry of a new firm may trigger an ‘all-win’ situation for all parties involved not only in the permissioned scenario but, surprisingly, also in the non-permissioned one. In such a situation, the incumbent manufacturer and the supplier will be both more profitable conditionally, after the entrant manufacturer enters the market. Finally, the issue that a permissioned or non-permissioned blockchain platform should be built is discussed in this work. If the use cost coefficient and the development cost coefficient of blockchain technology are both low, or if the use cost coefficient is high while the development cost coefficient is low (not very low), the incumbent manufacturer should establish a permissioned blockchain platform, and otherwise a non-permissioned one.