Encouraging suppliers to process innovations: A game theory approach

Toni Jarimo, Urho Pulkkinen, Ahti Salo

Research output: Contribution to journalArticleScientificpeer-review

1 Citation (Scopus)


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.
Original languageEnglish
Pages (from-to)403-423
JournalInternational Journal of Technology Intelligence and Planning
Issue number4
Publication statusPublished - 2005
MoE publication typeA1 Journal article-refereed


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