Dynamic analysis of green technology innovation in products and processes under supply chain competition scenarios-A study based on stochastic differential game model.

Abstract

This paper investigates the dynamics of market competition among manufacturers pursuing two types of green technology innovation: product innovation and process innovation, which provides a novel perspective on how green technological innovations contribute to enhancing product greenness. Using a two-tier supply chain framework, the study examines the differences in cost-sharing across various types of innovation and the impact of game players on product greenness. A stochastic differential game model involving a shared supplier and two competing manufacturers is constructed. Main findings are as follows: (1) In green product innovation, when market preference for greenness is relatively low, the formation of cost-sharing contracts is less influenced by the intensity of greenness-based market competition. In such scenarios, government subsidies emerge as a crucial tool to effectively guiding the market mechanism towards achieving its intended objectives. (2) As the market competition intensifies, manufacturers' incentives towards suppliers will shift from reducing costs to increasing demand. (3) When the intensity of green competitive is low, and supplier process innovation efficiency is high, manufacturers should bear a greater share of costs; Conversely, suppliers should bear more costs. When supplier process innovation efficiency is higher and market competition is stronger, suppliers should bear more costs if consumer green preferences are lower. (4) Over time, considering consumer preferences, a marginal increase in price exceeds the marginal increment in greenness with respect to contributing to stabilise price fluctuations. Conversely, it tends to raise the mean value of the price. (5) The increase in market competition intensity accelerates suppliers' and manufactures' strategy adjustments for green product innovation, but decelerates the strategy adjustment for suppliers' green process innovation.