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Supplier Development under Supply Risk and Reputational Risk

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Abstract

This paper considers the supplier investment decision-making problem in a supply chain consisting of an original equipment manufacturer (OEM), a global supplier, and a local supplier. To reduce dependence on global suppliers and improve supply stability, we develop a differential game model to investigate the optimal investment decisions of the OEM towards the local supplier under different risk scenarios and the impact of different risks on the optimal decisions. The results show that investment efficiency and risks have a significant impact on OEM investment decisions. Specifically, when the OEM has higher investment efficiency, investing in the local supplier is profitable for the OEM; conversely, when the investment efficiency of the OEM is lower, it does not invest. In addition, an increase in the supply risk of the global supplier will lower the entry threshold for OEM investment, but an increase in the supply risk of the local supplier and the reputational risk of both will increase this threshold, meaning that only the OEM with significantly higher investment efficiency can profit.

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Data sharing not applicable to this article as no datasets were generated or analysed during the current study.

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Acknowledgments

The authors are very grateful to the editor-in-chief, the associate editor, and the anonymous referees for their constructive comments and suggestions that have greatly improved this article. This work has been supported in part by the National Natural Science Foundation of China (NSFC) under Grant No.72271208, and the China Postdoctoral Science Foundation under Grant No.2023M741907.

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Authors and Affiliations

  1. School of Management, Xiamen University, Xiamen, 361005, China

    Zhaowei Miao, Yu Wang & Rongjing Zhu

  2. School of Economics and Management, Tsinghua University, Beijing, 100084, China

    Lili Shangguan

Authors
  1. Zhaowei Miao
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  2. Yu Wang
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  3. Rongjing Zhu
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  4. Lili Shangguan
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Correspondence to Lili Shangguan.

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Additional information

Zhaowei Miao is a professor of the School of Management at Xiamen University. He received his BS degree in mathematics from Nanjing University and his PhD degree in industrial engineering and engineering management from Hong Kong University of Science and Technology. His research interests are in the areas of supply chain management, network flow and algorithm design. His research papers have been published in journals including Naval Research Logistics, European Journal of Operational Research, Omega, etc.

Yu Wang is a postdoctoral researcher in the School of Management at Xiamen University. She received her BS degree in logistics management and her PhD degree in management science and engineering both from Shandong University of Science and Technology. Her research areas include green supply chain management, green innovation, and CSR.

Rongjing Zhu is a PhD candidate in management science and engineering at Xiamen University. His research interests are in the areas of supply chain management, remanufacturing and outsourcing.

Lili Shangguan is a postdoctoral researcher in the School of Economics and Management at Tsinghua University. She received her BS degree in logistics management from Fuzhou University and her PhD degree in management science and engineering from Xiamen University. Her research interests include e-commerce, pricing strategy and supply chain management.

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Miao, Z., Wang, Y., Zhu, R. et al. Supplier Development under Supply Risk and Reputational Risk. J. Syst. Sci. Syst. Eng. (2024). https://doi.org/10.1007/s11518-024-5595-y

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