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Effect of partial cross ownership on supply chain performance

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  • Chen, Jiguang
  • Hu, Qiying
  • Song, Jing-Sheng

Abstract

Partial cross ownership (PCO) in a dyad supply chain refers to a situation where each firm holds a portion of its partner’s shares. We study this topic in push and pull supply chains, and prove that neither the supply chain’s nor any member’s profit changes with the percentage of the leader’s shares the follower holds. However, while the profits of the chain and the leader increase with the percentage of the follower’s shares held by the leader, the follower’s profit does not necessarily increase or decrease. As a result, both partners can always achieve a win–win by setting a proper price for transferring the follower’s shares to the leader. Moreover, the equilibrium wholesale price may be greater than the retail price in the push chain, but less than the marginal production cost in the pull chain, contradicting the usual results found in the literature. We also derive a necessary and sufficient condition on the structure of PCO allowing a pull chain to perform better than a push one. This extends Cachon (2004)’s result that a pull chain always performs better than a push one (without PCO). Finally, PCO can coordinate a chain if and only if each one holds half of the other’s shares.

Suggested Citation

  • Chen, Jiguang & Hu, Qiying & Song, Jing-Sheng, 2017. "Effect of partial cross ownership on supply chain performance," European Journal of Operational Research, Elsevier, vol. 258(2), pages 525-536.
    • Handle: RePEc:eee:ejores:v:258:y:2017:i:2:p:525-536
    DOI: 10.1016/j.ejor.2016.08.046
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    References listed on IDEAS

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    3. Jin Li & Xiaodong Yang & Victor Shi & Gangshu (George) Cai, 2023. "Partial centralization in a durable‐good supply chain," Production and Operations Management, Production and Operations Management Society, vol. 32(9), pages 2775-2787, September.
    4. Ding, Rui & Wang, Xianjia & Zhao, Jinhua & Gu, Cuiling & Wang, Tao, 2023. "The evolution of cooperation in spatial public goods games under a risk-transfer mechanism," Chaos, Solitons & Fractals, Elsevier, vol. 169(C).
    5. Grigory Pishchulov & Knut Richter & Sougand Golesorkhi, 2023. "Supply chain coordination under asymmetric information and partial vertical integration," Annals of Operations Research, Springer, vol. 329(1), pages 1315-1356, October.
    6. Zhang, Linghong & Pan, Huimin, 2025. "How to improve the key component's quality: the impact of overconfident manufacturer's R&D investment," Operations Research Perspectives, Elsevier, vol. 14(C).
    7. Wenqiang Li & Juan He & Yangyan Shi, 2024. "Contracting Supply Chains Considering Retailers’ Marketing Efforts," Mathematics, MDPI, vol. 12(11), pages 1-24, May.
    8. Huang, Weixiang & Zhou, Wenhui & Chen, Jiguang & Chen, Xiaohong, 2019. "The government’s optimal subsidy scheme under Manufacturers’ competition of price and product energy efficiency," Omega, Elsevier, vol. 84(C), pages 70-101.
    9. Li, Jin & Yang, Shilei & Shi, Victor & Zhai, Senjing, 2020. "Partial vertical centralization in competing supply chains," International Journal of Production Economics, Elsevier, vol. 224(C).
    10. Liangjie Xia & Qingyi Kong & Youdong Li & Juanjuan Qin, 2023. "Effect of equity holding on a supply chain’s pricing and emission reduction decisions considering information sharing," Annals of Operations Research, Springer, vol. 329(1), pages 619-656, October.
    11. Xia, Qiu & Zhi, Bangdong & Wang, Xiaojun, 2021. "The role of cross-shareholding in the green supply chain: Green contribution, power structure and coordination," International Journal of Production Economics, Elsevier, vol. 234(C).
    12. Junchong Pu, 2024. "The optimal decision for automobile enterprises considering shareholding strategies and dual‐credit policy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(1), pages 80-97, January.

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