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The effect of energy efficiency retrofits on radical innovation: From the perspective of supply chain

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  • Zhang, Qianxiang
  • Lin, Boqiang

Abstract

Radical innovation is crucial for continuous improvement in energy efficiency. This paper explores the backward driving effect of downstream customers on upstream suppliers' radical innovation from the perspective of supply chain vertical linkages. Using supply chain data from Chinese listed companies, this paper examines the impact of downstream customers' energy efficiency retrofits on upstream suppliers' radical innovation. We find that: (1) Downstream customers' energy efficiency retrofits significantly promote upstream suppliers' radical innovation, while suppliers' energy efficiency retrofits have a crowding-out effect on their radical innovation. (2) Heterogeneity analysis reveals that the backward driving effect of downstream customers on upstream suppliers’ radical innovation is more pronounced in supply chains where the supplier has strong market influence and the customer has weak market influence. (3) The effect in the supply chain is only effective for radical innovation, with insignificant impact on incremental innovation and no green innovation bias. The findings provide a new perspective and empirical reference for actively cultivating radical innovation capabilities and deeply understanding the pathways to improving energy efficiency.

Suggested Citation

  • Zhang, Qianxiang & Lin, Boqiang, 2024. "The effect of energy efficiency retrofits on radical innovation: From the perspective of supply chain," Energy, Elsevier, vol. 311(C).
    • Handle: RePEc:eee:energy:v:311:y:2024:i:c:s0360544224031384
    DOI: 10.1016/j.energy.2024.133362
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