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Investment strategy of low-carbon technology in a competitive market: Technology R&D or purchases?

Author

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  • Yu, Man
  • Liu, Kanying

Abstract

This study investigates the issues of manufacturers' low-carbon technology investment strategies and their impacts while considering innovation uncertainty in a competitive market. We build game theoretical models to analyze various low-carbon technology investment formats. The findings reveal that manufacturers' investment decisions are heavily influenced by the success probability of research and development (R&D), the intensity of competition, and consumers' low-carbon awareness. It also shows that, under certain circumstances, a manufacturer's R&D behavior can benefit its rival supply chain. Then, we derive the conditions under which low-carbon technology R&D or technology purchases will be selected. Surprisingly, both manufacturers adopt the same type of investment method. This implies that uncertainty in innovation is not a barrier to investing in low-carbon technology R&D. However, bilateral R&D on low-carbon technology may harm competitive supply chains. This study sheds light on how enterprises can make best decisions regarding low-carbon technology investments while considering green development.

Suggested Citation

  • Yu, Man & Liu, Kanying, 2025. "Investment strategy of low-carbon technology in a competitive market: Technology R&D or purchases?," Economic Modelling, Elsevier, vol. 151(C).
    • Handle: RePEc:eee:ecmode:v:151:y:2025:i:c:s0264999325001853
    DOI: 10.1016/j.econmod.2025.107190
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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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