Green R&D in Supply Chains: A Game Analysis of Core Firm Sponsorship and Supplier Independence

Amid growing environmental and social pressures, enhancing supply chain sustainability has become a central concern for firms, with supplier Environmental, Social, and Governance practices, particularly green Research and Development (R&D), playing a pivotal role. However, how dominant firms incentivize supplier green R&D and how such sponsorship influences the interests of different supply chain members remain underexplored. This study develops a Stackelberg game model consisting of a supplier, a dominant core firm (acting as a retailer), and a weak retailer to investigate two widely observed green R&D approaches. The first is supplier-independent R&D, where the supplier bears all R&D costs. The second is core firm-sponsored R&D, which can take the form of either core firm exclusive sponsored R&D (CE), where the benefits are restricted to the core firm, or core firm inclusive sponsored R&D (CI), where the benefits are shared across all downstream firms. The analysis reveals that core firm sponsorship is not always accepted by the supplier, even when it reduces her direct R&D costs. When R&D costs are high, supplier independent R&D emerges as the equilibrium choice. Only under moderate R&D costs does the supplier accept sponsorship from the core firm, which can lead to win-win or sub-win-win outcomes for the core firm and supplier. However, such sponsorship, especially in its exclusive form, may harm the weak retailer, challenging the common belief that ESG-oriented strategies universally benefit all stakeholders.