Dynamic Green Innovation Decision of the Supply Chain with Innovating and Free-Riding Manufacturers: Cooperation and Spillover

Abstract

Green innovation for supply chain has attracted much academic attention. Yet, there is no adequate understanding of how spillover and cooperation can impact the enterprises’ green innovation decisions in the presence of free-rider. Besides, the dynamic impact of green innovation on emission is still lack of attention. We develop a differential game model that explicitly considers a supply chain with two types of manufacturers (i.e., green innovation and free-riding) to examine the dynamics of green innovation. The analysis reveals that under the noncooperation mode, the emissions and profits of free-riding manufacturers are found to be lower than that of innovating manufacturers, but technology spillovers will narrow the gap between them. Under the cooperation mode, there would be greater innovation efforts of green manufacturers and lesser efforts of green suppliers. Moreover, technology spillovers will have less impact on optimal decision changes. The profit of free-riding manufacturers is higher than that of innovating manufacturers, but the initial market power will affect the changes in their sales and profits. Meanwhile, cooperation will increase the total emission amount and long-term profits of the green supply chain, and technology spillovers of green manufacturers will help narrow the emission gap and broaden the profit gap, while that of the suppliers will have the opposite effect. The present study provides a new perspective for research on green innovation decisions for supply chain.