Abstract
This study explores a supply chain with a capital-constrained startup supplier who invests in product greenness and a manufacturer who sells green products to consumers under demand uncertainty. Green investment of the supplier is supported by the manufacturer with two incentive contracts: (i) investment- and (ii) revenue-sharing contracts. Profit- and survival-seeking objectives are considered for the startup supplier. Results show that the profit-seeking supplier increases its product greenness if demand uncertainty rises, whereas the survival-seeking supplier increases its product greenness if its capital constraints increase. Compared with the commonly used wholesale price contract, investment- and revenue-sharing contracts can help facilitate the “win-win” supply chain cooperation for improving product greenness. If the profit-seeking supplier cooperates with the manufacturer, the investment-sharing contract is preferred as the demand uncertainty increases. If a survival-seeking supplier cooperates with the manufacturer, the revenue-sharing contract is preferred as the capital constraint increases. Overall, the revenue-sharing contract is preferred given the high attractiveness of the green investment. By extending the discussion into two periods, the revenue-sharing contract will be preferred in the survival-seeking case because the cooperation can continue in a large parameter space.
Highlights
Product greenness expresses how environmentally friendly products are, and it always shows a positive correlation to consumers’ purchasing decisions [1]. us, firms always take active measures to invest in green technologies and provide products with high greenness to establish market competitiveness [2, 3]
To support normal operations and green innovations, these startup suppliers always take on debts and might face bankruptcy risk while facing payment defaults [6, 7]. erefore, manufacturers always help to pay for the suppliers’ green innovations
Given a 2.5, we explore the effects of demand uncertainty σ, capital constraint y, and attractiveness of green innovation z on the supplier’s green innovation and the manufacturer’s expected profits
Summary
Product greenness expresses how environmentally friendly products are, and it always shows a positive correlation to consumers’ purchasing decisions [1]. us, firms always take active measures to invest in green technologies and provide products with high greenness to establish market competitiveness [2, 3]. Given the investment-sharing value β and revenue-sharing value δ, Proposition 1 summarises and presents equilibrium supply chain decisions, survival probabilities of startup supplier, and expected profits of the manufacturer. E supply chain decisions, survival probabilities of startup supplier, and expected profits of the manufacturer under the three different contracts are presented, where z b2/k is substituted into most mathematical expressions. A promise of future profit is given and the startup supplier is encouraged to improve green innovation, even if taking a bankruptcy risk These positive effects will not change with the supplier’s objectives. In addition to the positive effects on stimulating green innovation, Proposition 4 states that investment- and revenue-sharing contracts can lead to winwin cooperation between the manufacturer and the supplier under different objectives. In comparison with the wholesale price contract, the manufacturer can make a win-win cooperation with the startup supplier by investment- and revenue-sharing
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