Interactions between supply chain financing and information transparency

Abstract

The practice in recent years shows information transparency between supply chain members is increasingly becoming a major concern for the realization of internal financing. To address this, we investigate how the manufacturer’s internal financing strategy interacts with an informed retailer’s information sharing (IS) strategy under a monopoly or competition supply chain. We establish an analytical model, where the manufacturer may provide a financial support for a capital-constrained retailer. The retailer possesses a demand information advantage over the manufacturer and holds an option to share it with the manufacturer. The main findings are shown as following. First, we present the retailer may strategically utilize IS policy to induce the manufacturer to provide financial services when the external financing rate is moderate and expected demand is low. Second, we extend our findings to a competitive environment. With the enhanced competition intensity, the internal financing willingness is strengthened, whereas the IS willingness is weakened. In this context, the manufacturer becomes more willing to provide financial assistance for the retailer to alleviate the negative effect from market competition. With such enhanced internal financing willingness from the manufacturer, the retailer becomes less willing to adopt IS policy.