The role of cross-shareholding in the green supply chain: Green contribution, power structure and coordination

Abstract

Although cross-shareholding has increasingly been adopted in the industry to improve strategic synergy between companies, its role in the green supply chain is seldom investigated. By employing a Stackelberg game model, this paper investigates how the mechanism of cross-shareholding affects operational behaviour in a green supply chain. Specifically, we examine how cross-shareholding affects pricing strategies, carbon emissions reduction and profit in two supply chain models with different power structures, namely the manufacturer-dominated supply chain (MD model) and the retailer-dominated supply chain (RD model). We find that both the manufacturer and the retailer in the green supply chain reduce more carbon emissions after cross-shareholding. Both the manufacturer and the retailer can earn greater profits than would be possible in a decentralised supply chain when the proportion of cross-shareholding meets a certain threshold. Furthermore, our results show that the ratio of carbon emissions reduction between the manufacturer and the retailer in the cross-shareholding supply chain is affected by the proportion of shares and the power structure. In the MD model, carbon emissions reduction is positively affected by the proportion of the manufacturer's shares held by the retailer. In the RD model, it is negatively affected by the proportion of the retailer's shares held by the manufacturer. A revenue-sharing contract can be adopted to improve the performance of the cross-shareholding supply chain. Our results have important managerial implications for companies who intend to improve their environmental and financial performances through cross-shareholding when a centralised decision is difficult to achieve.