Shareholding or authorization? The choice of cooperation between original equipment manufacturers and independent remanufacturers

Abstract

This study investigates the transformative role of equity participation in remanufacturing supply chains, where shareholding has emerged as a strategic complement to conventional authorization frameworks between original equipment manufacturers (OEMs) and independent remanufacturers (IRs). By integrating shareholding into the remanufacturing supply chain, we focus on the impact of different remanufacturing modes on consumers' willingness to pay (WTP) for remanufactured products, and further discussing how these effects shape the cooperation choices of supply chain members. Using a game-theoretic model, we analyze three scenarios: competition, shareholding, and authorization. We reveal that shareholding incentivizes full remanufacturing engagement by the IR, whereas authorization suppresses such initiatives. This divergence stems from the structural capacity of equity participation while mitigating product cannibalization risks. When considering environmental impact, both shareholding and authorization can achieve a win-win-win situation on the triple bottom line under certain conditions. In addition, despite the potential for enhanced systemic efficiency under shareholding, persistent preference conflicts between the OEM (favoring the authorization mode) and the IR (preferring the shareholding mode) preclude Pareto-optimal outcomes. The OEM's active strategic behavior can solve this negotiation dilemma, including choosing to implement cost reduction strategy and equity structure adjustment strategy.