Analysis on the impact of dynamic innovation investment strategy of green supply chain enabled by blockchain

Introduction

The rapid growth of the social economy has led to an increasing conflict between economic development and the availability of resources and environmental protection, which has become a significant constraint on sustainable progress. To overcome this issue, the government has introduced several green policies, including the People’s Republic of China’s Environmental Protection Tax Law and the People’s Republic of China’s Water Pollution Prevention and Control Law. The State Council has issued the Guiding Opinions on Accelerating the Establishment of a Green, Low-Carbon, and Cyclic Development Economic System, which encourages the implementation of green planning, design, investment, construction, production, living, and consumption in every aspect. The objective is to promote development based on efficient resource utilization, strict environmental protection, and effective greenhouse gas emission control, while establishing a green supply chain system to drive the transformation towards green and low-carbon energy. In response to national policies, social responsibility and environmental protection obligations, and fierce market competition, enterprises have shifted their operational strategies towards green supply chain management (Birasnav et al., 2022; Roh et al., 2022; Le, Vo & Venkatesh, 2022). Green supply chain management is a mode of management that focuses on environmental protection. It involves incorporations of environmental protection into all aspects of the supply chain operation and management to reduce negative impacts on the environment while optimizing supply chain operation and control to improve resource utilization efficiency and economic benefits. This process includes raw material purchasing, production and manufacturing, logistics and distribution, product sales, etc. The goal is to save resources and protect the environment.

In the management of green supply chains, there are various issues related to trust that need to be addressed. Information asymmetry, information opacity, counterfeiting, and selling of fake products are some of the prominent problems that are hindering the development of green supply chains. This is commonly known as the “lemon effect,” which is significantly slowing down the progress of these supply chains (Dutta et al., 2020; Liu et al., 2023). With the advent of blockchain technology, the longstanding issues of trust can now be effectively addressed. Blockchain’s decentralized nature, along with its transparency and non-tamperable data storage capabilities, makes it a reliable solution. Data is stored in blocks and maintained by multiple parties using cryptography to ensure secure transmission and access. This creates a robust technical system for storing data (Obeidat et al., 2021; Pun, Swaminathan & Hou, 2021). Jingdong, a Chinese e-commerce giant, has leveraged blockchain technology to solve the challenges of a green supply chain. The company has achieved the integration of “blockchain + green supply chain” through a “double-chain” fusion approach and launched the Jingdong Zhizhenchain BaaS platform to promote the development of a sustainable green supply chain. In recent times, green sustainability supply chain and green consumption trends have emerged as crucial drivers of enterprise innovation. By empowering the green supply chain with blockchain technology, inter-chain information sharing can be made transparent and traceable, thereby addressing the “trust” issue in green supply chain management. This move has caught the attention of both the business and academic communities (Li et al., 2022; Feng, Lai & Zhu, 2022; Zhu, Sarkis & Lai, 2012). In summary, the research on investment strategy for green supply chain innovation and blockchain technology, under the empowerment of blockchain, has significant scientific research and practical application value.

It is important to take note that businesses are currently facing tremendous pressure to survive in an unpredictable and ever-changing market environment. With the future development of the market being highly uncertain and volatile, the challenge of how to generate profits in such an environment has become a major concern for businesses. To grow and thrive in such a dynamic environment, businesses must innovate (Pardo-del Val et al., 2014; Shockley & Turner, 2016; Watson, Senyard & Dada, 2020; Zheng, Ji & Su, 2020). Constantly developing new and innovative products and having excellent products are essential for a brand to maintain a good reputation (Han, Zhang & Liu, 2022). Enterprises are always concerned about how to formulate a reasonable investment strategy for innovation. Investing in innovative products is one way for enterprises to achieve this goal. Research and development of new products, innovation, and technological upgrades can not only enhance the enterprise’s production line process and resource utilization but can also improve the efficiency of the enterprise’s services. Effective product innovation and technological upgrades can also bring new opportunities for the green marketing environment (Del Monte & Papagni, 2003). In July 2022, Starbucks, the coffee chain giant, introduced two classic iced coffees in the market. These products were a part of their coffee milk tea and milk tea eight treasure porridge range. The introduction of these products broke the “spice innovation” trend that had been dominating the ready-to-drink beverage market for a long time. These products gained a positive response from the market in just a few weeks, proving the “listing is fire” concept right. The introduction of innovative products can significantly impact the entire green supply chain. Companies must possess the capability to anticipate innovation to face future uncertainty. In the rapidly changing market environment, green supply chain members must adjust their strategies and operational modes to adapt to the changes in market demand by anticipating future product innovation success events. It is essential for the long-term development of green supply chain members to consider innovation investment strategies in anticipation of innovations. They should also consider the formulation of blockchain technology by distinguishing between pre-innovation and post-innovation environments.

This article explores the innovation investment strategy and cooperative alliance mode selection among green supply chain members under anticipated innovation. The goal is to enhance resource allocation across varying environments before and after green product innovation. Green suppliers use green manufacturing processes, green procurement, and select green materials for producing and innovating green products. Platforms choose eco-friendly green packaging and centralized distribution with environmentally sound transportation routes. Additionally, a platform’s blockchain technology offers consumers a guarantee of the authenticity of green products. The study utilizes the stochastic stopping problem to pinpoint the timing of successful innovative products and constructs a differential game model for green supply chain members operating in cooperative alliance modes.

The article’s innovative contributions include:

• Previous studies on “green supply chain + blockchain” have mostly relied on empirical analysis and static classifications, with little emphasis on theoretical scrutiny. However, theoretical analyses can help companies predict the impact of environmental factors on their strategic operations and offer valuable management perspectives.

• Blockchain empowerment for green supply chain optimization: integrating innovation factors for better management outcomes.

• Using the random stopping problem is a more realistic way to depict uncertainty in successful product innovation timing.

• We examine how blockchain and innovation affect the selection of cooperative alliance modes in green supply chains, including horizontal and vertical alliances.

This article presents a framework for a green supply chain, including a green supplier and two internet platforms. It constructs differential game models under three different modes: horizontal cooperation, non-cooperation, and vertical cooperation. The article analyzes the dynamic strategy formulation of green supply chain members and the cooperative alliance mode choices under the influence of innovation factors. The article is structured as follows: “Related Work” presents relevant studies; “Problem Description and Model Assumptions” explains the conceptual model; “Model Analysis” examines optimal gaming models under various decision-making modes; and “Model Analysis” further investigates optimal innovation investment strategies, blockchain technology levels, and enterprise performance under different modes, including sensitivity analysis of key parameters. The “Comparative Analysis under Different Cooperative Alliance Modes” section compares distinct decision-making approaches. The “Numerical Examples” section explores the effects of innovation realization rates and enhancement ratios on member strategies and performance, as well as the Pareto improvement effects of different cooperation methods on system profitability. Finally, the “Conclusion and Managerial Implications” section presents concluding thoughts and managerial implications.

Related work

The article explores research areas such as green supply chain management, blockchain-enabled green supply chains, and optimizing investment strategies for green supply chain innovation.

Among the related studies on green supply chain management, Jin (2021) investigated the green supply chain management issues based on performance evaluation and considered the optimized green supply chain performance evaluation system for automobile enterprises with the goal of carbon peaking and carbon neutrality, highlighting the need for green and low-carbon development. Kuiti et al. (2019) analyzed the impact of green initiatives on profitability and waste reduction in a green supply chain. Numerous scholars have conducted research on the influence of consumers’ environmental consciousness on green supply chain management. For instance, Yao & Askin (2019) concluded that the gradual rise in consumers’ environmental awareness has a significant impact on companies’ operational strategies in implementing green supply chain management. Yalabik & Fairchild (2011) found that consumers’ environmental awareness positively motivates firms to invest in environmental innovation. This study enriches the existing research on green supply chain management by incorporating the innovation factor from a dynamic perspective and utilizing the stochastic stopping problem to describe the phenomenon.

Blockchain-enabled green supply chains are gaining attention from both the business and academic communities, leading to research on various aspects of this subject. Cao et al. (2022) found that adding blockchain technology to traditional agricultural supply chains significantly improved yield and total surplus, positively incentivizing firms to invest in green initiatives. Liu et al. (2020) proposed a new supply chain structure to study investment decision-making and coordination in green agri-food supply chains using big data and blockchain. Bai et al. (2021) proposed a green data supply chain with a trust management mechanism to improve transparency and trust of the system. They evaluated its performance through simulations. It has been observed that most of the previous studies on blockchain-enabled green supply chains have focused on examining the effectiveness and impact of its implementation for businesses. However, they have overlooked the crucial decision-making issues that enterprises will face while applying blockchain technology. Therefore, this article takes into account the blockchain technology strategy developed by companies during their operations as a decision-making variable. The article investigates and analyses the issue of how blockchain technology strategy should be formulated for green supply chain members under the influence of innovation factors.

In terms of optimization of innovative investment strategies in green supply chains, Tian, Li & Zhang (2022) found that big data capabilities have a direct impact on green process innovation in the context of optimizing innovative investment strategies in green supply chains. The synergy of big data collection, analytics, and insights capabilities is crucial for achieving high levels of green process innovation. Academic research on innovation has been largely empirical in recent years, with both the business community and academics showing great interest in the topic (Luu et al., 2023; Panda et al., 2023; Sørensen et al., 2023; Shah & Saqib, 2023; Jell-Ojobor, Alon & Windsperger, 2022; Hsu & Jang, 2009; Sadovnikova, Kacker & Mishra, 2023). Paparoidamis et al. (2019) found that the degree of innovation in eco-friendly attributes positively affects consumers’ perception of a product’s eco-friendliness and willingness to adopt it. Jiang, Mavondo & Zhao (2020) found that network breadth and depth are important drivers of dynamic capabilities, which in turn facilitate successful product innovation in business networks. There is limited research available on product innovation in the theoretical community. However, this article will use the random stop problem to explain how uncertain the success time of product innovation can be. It will analyze how members of green supply chains can formulate their innovation investment strategy and select the cooperation mode from a dynamic perspective, considering the influence of various innovation factors.

A total of 162 journal articles on “blockchain-enabled green supply chain” were analyzed using CiteSpace software. The resulting knowledge map highlights current trends and hotspots. Figure 1 shows that green supply chain, agriculture, smart contracts, and blockchain technology are popular keywords.

Problem description

This article analyzes a green supply chain with a green supplier (F) and two Internet platforms (M,N) selling green products. The green supplier innovates to create environmentally-friendly products. The platforms prioritize eco-friendly transportation and packaging with sustainable materials. They invest in innovative strategies for green management and to promote environmental protection to more consumers (Ju et al., 2023; Shou et al., 2023). The platform will incorporate blockchain technology to tackle issues in green supply chain management, including information asymmetry, opacity, counterfeiting, and unethical practices. This will improve consumer trust and promote demand (Liu et al., 2023). In order to enhance consumer trust in green products, some platforms choose to use blockchain technology to establish a reliable traceability system for these products. However, this may inadvertently result in free-riding, where competitors also benefit from the increased sales generated by the improved consumer trust in green products. Despite this, the establishment of a credible green product traceability system can effectively promote the development of the industry and increase the desire of consumers to purchase these products (Liu et al., 2023). Some consumers may buy a green product from other platforms after receiving traceability information.

The concept of “green” has been gaining popularity in recent years, leading to the implementation of green supply chain management in various industries. Alongside this, strategic alliances have become increasingly common in the green supply chain system. Strategic alliance cooperation typically involves both horizontal and vertical alliances (Brookes & Roper, 2011; Gassenheimer, Baucus & Baucus, 1996; Boyle et al., 1992; Dant & Schul, 1992). Horizontal alliance is when two platforms work together to decide on investment strategies and blockchain technology in order to limit competition and maximize joint profits. In contrast, vertical alliance involves a green supplier collaborating with one platform to jointly optimize profits, while the other platform makes independent decisions to maximize its own profits.

Product innovation is vital for modern businesses. With technology advancing rapidly, updates are frequent and the innovation cycle can be unpredictable (Hao et al., 2019). This article will study how green suppliers and internet platforms can optimize their operational strategies in response to product innovations in the green supply chain. It aims to improve resource allocation and achieve long-term and stable development. A system schematic of the green supply chain is shown in Fig. 2.

The decision-making sequence within the green supply chain starts with the green supplier developing the innovation investment strategy $a(t)$, and the two platforms decide on the innovation investment strategy $s(t)$ and blockchain technology $u(t)$, respectively. Green supply chain members who are forward-thinking understand that the introduction of new and innovative products can have a significant impact on the consumer market environment and the profits of all members involved. Therefore, they formulate operation strategies for two different environments: pre-innovation and post-innovation. They also consider the profits that can be achieved in these different environments before and after the innovation, in order to ensure that the overall profits are maximized. The green supplier will create two investment strategies, one for pre-innovation $a_1\left(t\right)$ and another for post-innovation $a_2\left(t\right)$. Similarly, the platform will also develop two investment strategies, one for pre-innovation $s_{x1}\left(t\right)$ and another for post-innovation $s_{x2}\left(t\right)$. The competitor platform $y$ will develop two strategies for investment in innovation, one for pre-innovation $s_{y1}\left(t\right)$ and another for post-innovation $s_{y2}\left(t\right)$, where $x,y\in \left\{M,N\right\}$ and $x\ne y$ denote Platform M and Platform N, respectively. $i=1,2$ denotes two different environments before and after the success of product innovation, distinguishing that the evolution of green goodwill occurs in two different environments before and after the introduction of the innovative product. In addition, Platform $x$ will develop a pre-innovation blockchain technology level $u_{x1}\left(t\right)$ and a post-innovation blockchain technology level $u_{x2}\left(t\right)$, respectively. The decision timeline of the green supply chain is shown in Fig. 3. Table 1 summarizes the key symbols and detailed meanings in this article.

Model assuption

Hypothesis 1: Having a good reputation is crucial for any successful product. This is particularly important in the context of green supply chain, where consumers rely heavily on accurate information related to product quality, eco-friendliness, and blockchain traceability. In fact, this information can be considered as the goodwill of the product in terms of its environmental impact (Mushafiq, Prusak & Markiewicz, 2023). There are numerous instances of innovation and improvement of eco-friendly products on online platforms to promote environmental consciousness. For instance, the E-commerce Innovation and Entrepreneurship Park situated in the Beilin District of Suihua City, Heilongjiang Province, China, is dedicated to implementing the “Internet +” sales model for agricultural products. Through this, it vigorously encourages the development of green agricultural products to create new markets and brands. The park continuously upgrades and optimizes its products to enhance their quality further. Suihua City’s North Forest District established an official flagship store on Tmall to promote the unique characteristics of agricultural products. Qianmian E-commerce is selling agricultural and green products on internet platforms like Tmall, Alibaba, Suning, and Pinduoduo. These suppliers are implementing a green innovation investment strategy to create innovative green products using advanced green technologies and materials. Hewlett-Packard’s suppliers are using green supply chain management and circular economy to achieve green product innovation and upgrading. This initiative can attract consumer attention, enhance green goodwill, and maintain brand image (Mushafiq, Prusak & Markiewicz, 2023). The Internet platform has implemented a green innovation and investment strategy to achieve green management. This is done by improving and upgrading the logistics process, adopting environmentally friendly modes of transportation, optimizing and innovating packaging to improve energy efficiency in transportation, and implementing other green measures to create green logistics. They also use green packaging made of biodegradable and sustainable materials to promote the concept of environmental protection to more consumers. Green goodwill is not static and is always changing in a dynamic system. Therefore, green suppliers’ R&D and innovation efforts, along with the platform’s investment in a series of strategies to optimize green logistics and packaging, can drive the introduction of innovative products. This can help to build green goodwill across the entire green supply chain, benefitting the entire green supply chain system. It is assumed that the platforms are equally effective in improving goodwill (Sigué, 2002). In some cases, damage to goodwill can be caused by consumer forgetfulness or competition from other brands within the same industry (He et al., 2018; Guo et al., 2021). $G\left(t\right)$ is the stock of green goodwill. The kinetic equation is based on the (Nerlove & Arrow, 1962) goodwill model:

(1) $$\dot{G}(t)={\theta }_i{\alpha }_i(t)+{\alpha }_i{s}_{Mi}(t)+{\alpha }_i{s}_{Ni}(t)-{\delta }_{i}G,G(0)=G_0>0$$

Hypothesis 2: The National Development and Reform Commission and the Ministry of Commerce, along with other departments, are promoting the implementation of green logistics and packaging in the e-commerce, express delivery, and takeaway industries. This program requires e-commerce platforms, takeaway regulation platforms, and logistics companies to offer green consumption options. This includes promoting the standardization of e-commerce logistics, encouraging the use of recyclable and biodegradable packaging materials, and other sustainable logistics policies. Major platforms and enterprises are being encouraged to respond positively in order to establish the concept of green development and fulfill corporate social responsibility. For example, Suning has launched “zero rubber carton” packaging, and Jingdong uses recyclable red bags. Although these initiatives stimulate demand, they may also be negatively affected by competitors. However, by applying blockchain technology to realize anti-counterfeiting and traceability of green products, platforms can have a positive spillover effect and simultaneously promote demand for their own products and those of their competitors (Liu et al., 2023). In addition, investment in innovation by green suppliers can indirectly influence demand by accumulating goodwill which affects current and future sales, according to the interpretation of competition of Liu et al. (2020). Therefore, the following demand function is given:

(2) $$D_x={\eta }_i{s}_{xi}-{\xi }_i{s}_{yi}+{\lambda }_i{u}_{xi}+{\gamma }_i{u}_{yi}+{\omega }_{i}G$$

Hypothesis 3: To sharpen the focus of the study, the marginal profit ${\rho }_F$, ${\rho }_M$, ${\rho }_N$ of both green suppliers and platforms is assumed to be constant, while concentrating on strategies such as innovative investment strategies and blockchain technology (Chintagunta & Jain, 1992). Our model makes the assumption of setting the marginal profit as a fixed parameter. This is done to simplify the model and to focus on analyzing the optimization study of innovative investment strategies and blockchain technology strategies. However, we acknowledge that this assumption is a limitation of our model.

Hypothesis 4: In order to innovate a product, it takes a certain amount of time. It is also uncertain when the innovation will succeed (Hao et al., 2019). The occurrence of green product innovation and the research and development process can be represented by $\left\{\mathrm{\Gamma }\left(t\right):t>0\right\}$. The probability of success of the innovation at any moment $t$ is $\chi \in \left(0,1\right)$. Assuming T represents the date when innovation success was achieved, the operation time of the green supply chain can be divided into two intervals: pre-innovation $t\in \left[0,T\right]$ and post-innovation $t\in \left[T,+\mathrm{\infty }\right]$. Referring to the works of Van Heerde, Helsen & Dekimpe (2007) and Rubel, Naik & Srinivasan (2011), $\left\{\mathrm{\Gamma }\left(t\right):t>0\right\}$ represents a jumping process that can be expressed as a mathematical function

(3) $$\underset{\mathrm{\Delta }\to 0}{lim}\frac{P\left[\mathrm{\Gamma }\left(t+\mathrm{\Delta }\right)=2\mid \mathrm{\Gamma }\left(t\right)=1\right]}{\mathrm{\Delta }}=\chi ,\underset{\mathrm{\Delta }\to 0}{lim}\frac{P\left[\mathrm{\Gamma }\left(t\right)=1\mid \mathrm{\Gamma }\left(t+\mathrm{\Delta }\right)=2\right]}{\mathrm{\Delta }}=0$$when companies introduce innovative products, the public’s reaction to them can have a big impact on the company’s reputation. For example, in September of last year, Starbucks collaborated with artist Steven Harrington to release a limited number of Mason Jars decorated with pop-style illustrations. These cute and practical cups were highly sought-after by young people in the US, and this partnership helped boost Starbucks’ reputation. The introduction of innovative products can lead to an increase in goodwill, as noted by Van Heerde, Helsen & Dekimpe (2007) and Rubel, Naik & Srinivasan (2011). This process can be described as

(4) $$G\left(T^{+}\right)=\left(1+\varphi \right)G\left(T^{-}\right),G\left(T^{+}\right)\ne G\left(T^{-}\right)$$

Hypothesis 5: Assuming a quadratic cost function, as commonly used in previous studies (Martín-Herrán, Sigué & Zaccour, 2011), the innovation investment cost for the green supplier is $k_F{a}^2\left(t\right)/2$, The innovation investment cost for the platform is $k_{xu}{u}_x^2\left(t\right)/2$, while the cost of the blockchain technology is $k_{xs}{s}_x^2\left(t\right)/2$. $x=M,N$ denotes Platform M and Platform N, respectively. $k_{xu}>0$, $k_{xs}>0$ denote the respective cost coefficients.

Hypothesis 6: The successful launch of innovative products will make the green supply chain different in the pre-innovation and post-innovation environments, and the visionary green supply chain members will consider the operation strategies and profits under the pre-innovation and post-innovation phases, so as to formulate the optimal operation strategies under the different phases, and rationally allocate the resources in order to achieve the maximization of the overall profits. Since the enterprise does not know the exact time of innovation realization T, with ${\pi }_i$ before and after the innovation of profit, the net present value of its profits, respectively, $J_1={\int }_0^T{e}^{-rt}{\pi }_{1}dt$, $J_2={\int }_T^{\mathrm{\infty }}{e}^{-rt}{\pi }_{2}dt$, two environments of the expected net present value of profits for the $J=E\left(J_1+e^{-rt}{J}_2\right)$, the simplification of the collation to obtain the long-term profit function

(5) $$J={\int }_0^{\mathrm{\infty }}{e}^{-(r+\chi )}\{{\pi }_1+\chi J_2\}dt$$

Model analysis

This section will solve each strategy and profit of green supply chain members under the three modes of horizontal cooperative alliance (C), non-cooperative (B), and vertical cooperative alliance (H), respectively. It will also carry out the sensitivity analysis of the key parameters and provide managerial insights accordingly. To differentiate the models, the superscripts C, B, and H are used to denote the three modes, and the subscripts F, M, and N are used to denote the green suppliers and the two platforms, respectively. Proofs of all propositions and properties in the text can be found in the Supplemental Articles.