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| The Process Innovation of Competing Supply Chains under Cost Reduction |
| ZHAO Haixia，AI Xingzheng |
| 1. Southwest Petroleum University, Chengdu, China; 2.Sichuan Oil and Natural Gas Development Research Center, Chengdu, China; 3. University of Electronic Science and Technology of China, Chengdu, China |
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Abstract This study established a competing supply chain model that the manufacturer would decide whether to invest in process innovation to reduce the production cost. With the game theory of Stackelberg and the benchmarking of no innovation, it is identified that the game equilibrium conditions and dominant equilibrium of process innovation can improve the supply chain members’ performance. The results show that investing in process innovation is a dominant equilibrium which will realize the win-win of manufacturer and retailer when the coefficient of innovation investment is relatively small and the competition is relatively weak, or when the coefficient of innovation investment is relatively large and no matter how the intensity of competition is. If the competitor doesn’t invest in the process innovation, the manufacturer in this supply chain investing in the process innovation will contribute the Pareto improvement to the whole supply chain system, which is not affected by the intensity of competition and coefficient of innovation investment. However, if the competitor invests in the process innovation, the process innovation with relatively small investment coefficient in this supply chain will improve the performance of the whole supply chain when horizontal competition is relatively weak. What is more, even when the horizontal competition is very fierce, the manufacturer can realize Pareto improvement of the whole supply chain system by investing in process innovation with larger investment coefficient.
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Received: 17 April 2018
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