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The Optimal Financing Decisions of Capital-Constrained Manufacturers under Different Power Structures

Author

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  • Nan Xie

    (Hunan Provincial Key Laboratory of Big Data Mining and Application for Macro-Economy, School of Business, Hunan Normal University, Changsha 410081, China
    Hunan Institute for Carbon Peaking and Carbon Neutrality, Changsha 410081, China)

  • Zicong Duan

    (Hunan Provincial Key Laboratory of Big Data Mining and Application for Macro-Economy, School of Business, Hunan Normal University, Changsha 410081, China
    Hunan Institute for Carbon Peaking and Carbon Neutrality, Changsha 410081, China)

  • Haitao He

    (School of Business, Central South University, Changsha 410083, China)

Abstract

This paper investigates the optimal financing decisions of capital-constrained manufacturers under different power structures. Using a Stackelberg game model, it analyzes the optimal equilibrium operational decisions of capital-constrained manufacturers at varying levels of internal capital. The study finds that, compared to a power structure dominated by eco-innovative enterprises, a power structure led by ordinary enterprises enhances the level of eco-innovation of innovative products and the overall profitability of the supply chain. When eco-innovative enterprises are well-capitalized, internal financing has lower costs but may lead to idle funds, while bank financing and mixed financing have higher costs but make full use of available capital. When eco-innovative enterprises are undercapitalized, mixed financing is the optimal choice. The research employs numerical simulations to analyze the impacts of consumer environmental awareness, innovation investment costs, and production costs on the level of eco-innovation in products, manufacturers’ profits, and the overall profitability of the supply chain, providing decision-making references for governments and enterprises.

Suggested Citation

  • Nan Xie & Zicong Duan & Haitao He, 2024. "The Optimal Financing Decisions of Capital-Constrained Manufacturers under Different Power Structures," Mathematics, MDPI, vol. 12(16), pages 1-26, August.
    • Handle: RePEc:gam:jmathe:v:12:y:2024:i:16:p:2489-:d:1454816
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    References listed on IDEAS

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    2. Zhao Chen & Zhikuo Liu & Juan Carlos Suárez Serrato & Daniel Yi Xu, 2021. "Notching R&D Investment with Corporate Income Tax Cuts in China," American Economic Review, American Economic Association, vol. 111(7), pages 2065-2100, July.
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