IDEAS home Printed from https://ideas.repec.org/a/wsi/apjorx/v42y2025i01ns0217595924400219.html
   My bibliography  Save this article

Mitigating Supply Disruption Risks: Impact of Product Upgrading Strategy

Author

Listed:
  • Lu Yang

    (School of Economics and Management, Nanjing University of Science and Technology, Nanjing 210094, P. R. China)

  • Jun Zhang

    (School of Economics and Management, Nanjing University of Science and Technology, Nanjing 210094, P. R. China)

  • Xiutian Shi

    (School of Economics and Management, Nanjing University of Science and Technology, Nanjing 210094, P. R. China)

Abstract

Supply disruption is one of the crucial risks faced by supply chains in the changing external environment. To mitigate supply disruption risk and enhance resilience, product upgrading with Research and Development (R&D) investment is widely adopted by firms. In this paper, we establish a game-theoretic model to study the operation decisions and product upgrading strategies for a supply chain. Specifically, Firm 1 faces supply disruption risks when selling a normal product with a key component sourced from an unreliable supplier. To achieve supply resilience, the firm has an incentive to replace the unreliable supplier with product upgrading supported by R&D. It has an option to make high or low investments in R&D projects, indicating a high or low success rate. Our findings reveal that Firm 1 prefers to make investments in R&D for the upgraded product at a high investment level when the additional production cost of the upgraded product is relatively low or both the upgrading cost and supply disruption risk are relatively high. Extending our model to a duopoly scenario, we investigate the impact of competition on the product upgrading strategy selection. It is shown that a firm with a sufficiently large market share can drive its competitor out of the market by making R&D investments. Compared to the monopoly scenario, Firm 1 has a stronger incentive to upgrade the product under the duopoly scenario if its market share is relatively low. Finally, we identify the conditions where consumers get benefits from product upgrading. Our findings shed light on the importance of product upgrading strategy in a volatile business environment and provide insights into how firms can effectively mitigate supply disruption risk through R&D investments.

Suggested Citation

  • Lu Yang & Jun Zhang & Xiutian Shi, 2025. "Mitigating Supply Disruption Risks: Impact of Product Upgrading Strategy," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 42(01), pages 1-45, February.
  • Handle: RePEc:wsi:apjorx:v:42:y:2025:i:01:n:s0217595924400219
    DOI: 10.1142/S0217595924400219
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0217595924400219
    Download Restriction: Access to full text is restricted to subscribers

    File URL: https://libkey.io/10.1142/S0217595924400219?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:apjorx:v:42:y:2025:i:01:n:s0217595924400219. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/apjor/apjor.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.