To adapt or to standardize? Cross-market green product design under parallel importation impact

Abstract

This paper investigates whether a multinational firm should adapt or standardize its green product design (GPD) in different markets considering parallel importation and cross-market consumer environmental awareness (CEA) difference. We start with a basic case where a parallel importer may enter and generate some key findings. First, affected by standardization’s advantage of cost-saving benefits, adaptation’s advantage of handling market heterogeneity, and the parallel importer’s role of connecting different markets, the multinational firm will standardize GPD in the absence of parallel importation, and adaptive GPD will become an alternative if a parallel importer enters. Second, the entry of the parallel importer will bring benefits rather than threats to the multinational firm when the multinational firm adopts adaptive GPD and the CEA gap is extremely large. Consequently, the multinational firm is recommended to utilize the tool of widening greenness difference to cope with parallel importation. Furthermore, we make extensions to consider the possible competition between multinational firms and the circumstance whereby multiple parallel importers emerge. Our results show that the multinational firm is recommended to differentiate its product categories, develop a cooperative relationship with its competitor, or encourage the existence of slight parallel importation so that it could benefit from parallel importation.