Technology Regulation and Production Timing in a Co-Opetitive Supply Chain
Posted: 5 Jan 2018 Last revised: 18 Apr 2019
Date Written: January 1, 2018
Motivated by Google’s technology regulation practice in Android device industry, we consider firms’ decisions on production timing in a co-opetitive supply chain comprising a manufacturer and an original equipment manufacturer (OEM), where the manufacturer acts as the OEM’s upstream contract manufacturer and downstream competitor. Demand is uncertain, and depends on the market acceptance of key product features and designs. If a firm decides to implement ex-post production strategy (PS), it can delay the production until the market acceptance of its product is realized. Otherwise, ex-ante production strategy (AS) is implemented and the early commitment value is enjoyed. We find that, in the coopetive supply chain, PS does not always benefit either the manufacturer or the OEM, because the value of market acceptance realization is diminished by competition and the effect of early commitment under AS. Further, firms’ decisions on production timing are influenced by the degree of market acceptance uncertainty of their products, which can be low if the product design fits consumer expectations well. Both firms choose PS when they are at the risk of high uncertainty, while only one of them chooses PS when their uncertainty is moderate or high. Interestingly, when the competition is intense, the manufacturer tends to choose PS, because it can benefit from both the realized market acceptance and OEM’s early commitment.
Keywords: Market Acceptance; Co-Opetition; Technology Regulation; Production Timing Decisions
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