TY - JOUR
T1 - Action-dependent commitment in vertical collaborations
T2 - The effect of demand-creating innovations in a supply chain
AU - Ge, Zehui
AU - Hu, Qiying
AU - Goh, Chon Huat
AU - Zhao, Rui
N1 - Funding Information:
The authors are grateful to the editors and anonymous referees for their work. We are also thankful to MS. Kaimin Song who shared some interesting practical cases with us, Yiheng Jia who provided with some literal advices, and the seminar participants at Fudan University and University of Science and Technology Beijing who gave us some useful suggestions. Finally, this study was supported by the National Natural Science Foundation of China (Grant numbers: 71871016, 71671046 and 71729001).
PY - 2021/3
Y1 - 2021/3
N2 - The recent adoption of Internet-based technologies has boosted collaborative innovation between business partners, among which strategic commitments (e.g., informal communications and formal contracts) are often employed to cope with high uncertainty. Can such commitments reduce uncertainty and are they profitable for firms? Do penalties impede opportunistic behavior? We answer these questions by investigating action-dependent commitment, defined here as when all commitments are made in a certain sequence, in the context of collaborative innovation in a supply chain. Modeling a multi-stage game among the members of an alliance, we analyze firms’ ex-ante commitments and ex-post opportunistic behavior in R&D and production. First, we find that an action-dependent commitment can reduce the negative effects of uncertainty because it enhances both members’ efforts and profits in the sense of expectations as well as supply chain performance. In particular, the supplier is more incentivized to invest in R&D. Second, opportunistic behavior may be restrained to a certain extent, but not absolutely. Third, keeping the supplier's outside orders below a certain level can help firms maintain the stability of the alliance. In practice, managers could adopt to make an action-dependent commitment to encourage collaborative R&D efforts. Moreover, the existence of opportunism, even with a maximal punishment, implies that they must be prepared to exercise caution in certain extreme cases. Finally, managers must recognize who is the chain's leader for only such leaders who act first will get more and are willing to invest more.
AB - The recent adoption of Internet-based technologies has boosted collaborative innovation between business partners, among which strategic commitments (e.g., informal communications and formal contracts) are often employed to cope with high uncertainty. Can such commitments reduce uncertainty and are they profitable for firms? Do penalties impede opportunistic behavior? We answer these questions by investigating action-dependent commitment, defined here as when all commitments are made in a certain sequence, in the context of collaborative innovation in a supply chain. Modeling a multi-stage game among the members of an alliance, we analyze firms’ ex-ante commitments and ex-post opportunistic behavior in R&D and production. First, we find that an action-dependent commitment can reduce the negative effects of uncertainty because it enhances both members’ efforts and profits in the sense of expectations as well as supply chain performance. In particular, the supplier is more incentivized to invest in R&D. Second, opportunistic behavior may be restrained to a certain extent, but not absolutely. Third, keeping the supplier's outside orders below a certain level can help firms maintain the stability of the alliance. In practice, managers could adopt to make an action-dependent commitment to encourage collaborative R&D efforts. Moreover, the existence of opportunism, even with a maximal punishment, implies that they must be prepared to exercise caution in certain extreme cases. Finally, managers must recognize who is the chain's leader for only such leaders who act first will get more and are willing to invest more.
KW - Collaborative innovation
KW - Commitment
KW - New product development
KW - Opportunistic behavior
KW - Supply chain management
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U2 - 10.1016/j.tre.2020.102164
DO - 10.1016/j.tre.2020.102164
M3 - Article
AN - SCOPUS:85099620639
VL - 147
JO - Transportation Research, Part E: Logistics and Transportation Review
JF - Transportation Research, Part E: Logistics and Transportation Review
SN - 1366-5545
M1 - 102164
ER -