This paper studies the design of process-innovation incentives in supplier networks. A real-life case study from the boat-building industry is presented to illustrate the importance of explicitly encouraging suppliers to continuous improvement. Motivated by the case study, we constructed a game theory model trying to capture the possible conflicting interests of different parties in a company network. Using our model, we applied three different bargaining rules in order to determine ex-ante profit-sharing principles that award process-innovations. The aim of profit sharing is that the efficiency-improving arrangements can be implemented so that none of the network companies has to incur losses. Consequently, if the profit-sharing principles are ex-ante contracted, then the network companies have the incentive to innovate.
|Journal||International Journal of Technology Intelligence and Planning|
|Publication status||Published - 2005|
|MoE publication type||A1 Journal article-refereed|
Jarimo, T., Pulkkinen, U., & Salo, A. (2005). Encouraging suppliers to process innovations: A game theory approach. International Journal of Technology Intelligence and Planning, 1(4), 403-423. https://doi.org/10.1504/IJTIP.2005.008590