Analysis of financing strategy in coopetition supply chain with opportunity cost

Many reports indicate that manufacturers may initially provide trade credit for a capital-constrained re-tailer to enhance product output. However, with the easy access to introduce a direct channel nowadays, whether the benefits of trade credit in adjusting product output still hold needs to be examined. In re-sponse to this problem, this study analyzes firms' preferences for trade credit versus bank credit in the absence/presence of a direct channel and examines the interactions between firms' credit and channel strategies. We find that in the absence of a direct channel, both firms prefer trade credit for a low oppor-tunity cost; however, after introducing a direct channel, the manufacturer prefers to offer a trade credit for either (i) a low opportunity cost and a high sales cost or (ii) a high opportunity cost and a low sales cost. Comparing the two, we present that introducing a direct channel always strengthens the man-ufacturer's preference for trade credit but weakens (strengthens) the retailer's preference given a low (high) sales cost. This finding suggests that for the upstream manufacturer, trade credit becomes even more beneficial after introducing a direct channel. Moreover, relative to bank credit, trade credit weakens (strengthens) the manufacturer's preference for introducing a direct channel yet strengthens (weakens) the retailer's preference given a low (high) opportunity cost. We also extend our analysis to price com-petition, uncertain demand, and sequential quantity decisions.(c) 2022 Elsevier B.V. All rights reserved.