Collaborative innovation in low-carbon supply chain under cap-and-trade: Dual perspective of contracts and regulations

Escalating climate change has prompted the country to make more efforts for reducing greenhouse gas emissions and implementing stricter external environmental regulations, and stimulated supply chain firms to use coordination contracts for low-carbon technology innovation. Therefore, supply chains face challenges in selecting low-carbon innovation strategies and managing bilateral moral hazard issues while governments grapple with optimizing regulatory policies. This study constructs an evolutionary game model to examine the collaborative innovation strategies of retailers and manufacturers by decoupling internal coordination contracts from external environmental regulations. Stability analysis reveals the dynamics of collaborative innovation under the sole constraint of internal coordination contracts and elucidates how external environmental regulations reshape strategic behaviors within supply chains. Based on the fiber-optic cable supply chain case study, we implement sensitivity analysis of parameters by numerical simulations. The analysis yielded three key insights: 1) under the conditions of information asymmetry, increased revenue-sharing ratios may suppress collaborative innovation and foster opportunistic behavior if relying solely on internal coordination contract constraints in the supply chain; conversely, 2) external environmental regulations, including cap-and-trade and reward-penalty mechanisms, significantly facilitate collaborative innovation in low-carbon technology, reducing the moral hazard and opportunistic behavior caused by the information asymmetry; and 3) the behavior of supply chain participating in low-carbon innovation strongly correlates with both carbon reduction capacity and total reduction goals.