IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v17y2025i15p7124-d1718647.html

Evaluating Supply Chain Finance Instruments for SMEs: A Stackelberg Approach to Sustainable Supply Chains Under Government Support

Author

Listed:
  • Shilpy

    (Department of Management, Birla Institute of Technology and Science, Pilani 333031, India)

  • Avadhesh Kumar

    (School of Advanced Sciences, VIT-AP University, Amaravati 522237, India)

Abstract

This research aims to investigate financing decisions of capital-constrained small and medium-sized enterprise (SME) manufacturers and distributors under a Green Supply Chain (GSC) framework. By evaluating the impact of Supply Chain Finance (SCF) instruments, this study utilizes Stackelberg game model to explore a decentralized decision-making system. To our knowledge, this investigation represents the first exploration of game models that uniquely compares financing through trade credit, where the manufacturer offers zero-interest credit without discounts with reverse factoring, while also considering distributor’s efforts on sustainable marketing under the impact of supportive government policies. Our study suggests that manufacturers should adopt reverse factoring for optimal profits and actively participate in distributors’ financing decisions to address inefficiencies in decentralized systems. Furthermore, the distributor’s demand quantity, profits and sustainable marketing efforts show significant increase under reverse factoring, aided by favorable policies. Finally, the results are validated through Python 3.8.8 simulations in the Anaconda distribution, offering meaningful insights for policymakers and supply chain managers.

Suggested Citation

  • Shilpy & Avadhesh Kumar, 2025. "Evaluating Supply Chain Finance Instruments for SMEs: A Stackelberg Approach to Sustainable Supply Chains Under Government Support," Sustainability, MDPI, vol. 17(15), pages 1-25, August.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:15:p:7124-:d:1718647
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/17/15/7124/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/17/15/7124/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Silaghi, Florina & Moraux, Franck, 2022. "Trade credit contracts: Design and regulation," European Journal of Operational Research, Elsevier, vol. 296(3), pages 980-992.
    2. Zhu, Qinghua & Sarkis, Joseph & Lai, Kee-hung, 2008. "Green supply chain management implications for "closing the loop"," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 44(1), pages 1-18, January.
    3. Jung, Seung Hwan & Feng, Tianjun, 2020. "Government subsidies for green technology development under uncertainty," European Journal of Operational Research, Elsevier, vol. 286(2), pages 726-739.
    4. Jena, Sarat Kumar & Padhi, Sidhartha S & Cheng, T.C.E., 2023. "Optimal selection of supply chain financing programmes for a financially distressed manufacturer," European Journal of Operational Research, Elsevier, vol. 306(1), pages 457-477.
    5. Wen‐Min Lu & Qian Long Kweh & Irene Wei Kiong Ting & Chunya Ren, 2023. "How does stakeholder engagement through environmental, social, and governance affect eco‐efficiency and profitability efficiency? Zooming into Apple Inc.'s counterparts," Business Strategy and the Environment, Wiley Blackwell, vol. 32(1), pages 587-601, January.
    6. An, Simin & Li, Bo & Song, Dongping & Chen, Xue, 2021. "Green credit financing versus trade credit financing in a supply chain with carbon emission limits," European Journal of Operational Research, Elsevier, vol. 292(1), pages 125-142.
    7. Wen Ding & Huihui Song, 2020. "Financing the price-setting newsvendor with sales effort," Journal of Management Analytics, Taylor & Francis Journals, vol. 7(4), pages 564-590, October.
    8. Hua, Shengya & Liu, Jingchen & Cheng, T.C.E. & Zhai, Xin, 2019. "Financing and ordering strategies for a supply chain under the option contract," International Journal of Production Economics, Elsevier, vol. 208(C), pages 100-121.
    9. Huang, Zhehao & Liao, Gaoke & Li, Zhenghui, 2019. "Loaning scale and government subsidy for promoting green innovation," Technological Forecasting and Social Change, Elsevier, vol. 144(C), pages 148-156.
    10. Xiaoli Zhang & Guoyi Xiu & Fakhar Shahzad & Yupeng Duan, 2021. "Optimal Financing Strategy in a Capital-Constrained Supply Chain with Retailer Green Marketing Efforts," Sustainability, MDPI, vol. 13(3), pages 1-19, January.
    11. Shuanglian Chen & Zhehao Huang & Benjamin M. Drakeford & Pierre Failler, 2019. "Lending Interest Rate, Loaning Scale, and Government Subsidy Scale in Green Innovation," Energies, MDPI, vol. 12(23), pages 1-22, November.
    12. Ghosh, Debabrata & Shah, Janat, 2015. "Supply chain analysis under green sensitive consumer demand and cost sharing contract," International Journal of Production Economics, Elsevier, vol. 164(C), pages 319-329.
    13. Stefania Cosci & Roberto Guida & Valentina Meliciani, 2020. "Does trade credit really help relieving financial constraints?," European Financial Management, European Financial Management Association, vol. 26(1), pages 198-215, January.
    14. Lijing Zhu & Yi Ou, 2023. "Enhance financing for small- and medium-sized suppliers with reverse factoring: a game theoretical analysis," Annals of Operations Research, Springer, vol. 331(1), pages 159-187, December.
    15. Chen, Xiangfeng, 2015. "A model of trade credit in a capital-constrained distribution channel," International Journal of Production Economics, Elsevier, vol. 159(C), pages 347-357.
    16. Yang, Yang & Liu, Jie, 2023. "Price timing and financing strategies for a capital-constrained supply chain with price-dependent stochastic demand," International Journal of Production Economics, Elsevier, vol. 261(C).
    17. Bian, Junsong & Zhao, Xuan, 2020. "Tax or subsidy? An analysis of environmental policies in supply chains with retail competition," European Journal of Operational Research, Elsevier, vol. 283(3), pages 901-914.
    18. Raziyeh Reza-Gharehbagh & Sobhan Arisian & Ashkan Hafezalkotob & Ahmad Makui, 2023. "Sustainable supply chain finance through digital platforms: a pathway to green entrepreneurship," Annals of Operations Research, Springer, vol. 331(1), pages 285-319, December.
    19. Yan, Nina & Sun, Baowen & Zhang, Hui & Liu, Chongqing, 2016. "A partial credit guarantee contract in a capital-constrained supply chain: Financing equilibrium and coordinating strategy," International Journal of Production Economics, Elsevier, vol. 173(C), pages 122-133.
    20. Sripad K. Devalkar & Harish Krishnan, 2019. "The Impact of Working Capital Financing Costs on the Efficiency of Trade Credit," Production and Operations Management, Production and Operations Management Society, vol. 28(4), pages 878-889, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Junjian Wu & Jennifer Shang, 2021. "Green Credit Financing Equilibrium under Government Subsidy and Supply Uncertainty," Sustainability, MDPI, vol. 13(22), pages 1-22, November.
    2. Xie, Xiaofeng & Chen, Xiangfeng & Xu, Xun & Gu, Jing, 2024. "Financing a dual capital-constrained supply chain: Profit enhancement and diffusion effect of default risk," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 181(C).
    3. Jiang, Wen-Hui & Xu, Ling & Chen, Zhen-Song & Govindan, Kannan & Chin, Kwai-Sang, 2022. "Financing equilibrium in a capital constrained supply Chain: The impact of credit rating," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 157(C).
    4. Wen-Bin Wang & Qiang Sun & Xiu-Xia Yan & Yuan-Qing Liu, 2022. "Dual-Channel Supply Chain Financing Operation Strategy Considering Free-Riding Effect under Different Power Structures," Sustainability, MDPI, vol. 14(15), pages 1-27, July.
    5. Lai, Zhixuan & Lou, Gaoxiang & Ma, Haicheng & Chung, Sai-Ho & Wen, Xin & Fan, Tijun, 2022. "Optimal green supply chain financing strategy: Internal collaborative financing and external investments," International Journal of Production Economics, Elsevier, vol. 253(C).
    6. Xie, Xiaofeng & Shi, Xinyu & Gu, Jing & Xu, Xun, 2023. "Examining the Contagion Effect of Credit Risk in a Supply Chain under Trade Credit and Bank Loan Offering," Omega, Elsevier, vol. 115(C).
    7. Liu, Lu & Zhang, Wenhao & Li, Yongjian & Chen, Ting & Sun, Yuying, 2025. "Optimal financing amid supply chain resilience: 3PL, partial guarantee, or trade credit?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 204(C).
    8. Liang, Yuting & Zhang, Qingyu, 2025. "ESG equity or green credit: Financing strategies for green transformation in the supply chain under consumption subsidies," International Journal of Production Economics, Elsevier, vol. 280(C).
    9. Wu, Huamin & Weng, Jiaxiang & Li, Guo & Zheng, Hong, 2024. "Green subsidy Strategies and fairness concern in a Capital-Constrained supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 192(C).
    10. Xiaoli Zhang & Guoyi Xiu & Fakhar Shahzad & Caiquan Duan, 2021. "The Impact of Equity Financing on the Performance of Capital-Constrained Supply Chain under Consumers’ Low-Carbon Preference," IJERPH, MDPI, vol. 18(5), pages 1-22, February.
    11. Avinadav, Tal & Levy, Priel, 2023. "The effect of an uncertain commission rate on the decisions of a capital-constrained developer," Operations Research Perspectives, Elsevier, vol. 11(C).
    12. Xu, Song & Fang, Lei, 2020. "Partial credit guarantee and trade credit in an emission-dependent supply chain with capital constraint," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 135(C).
    13. Avinadav, Tal & Levy, Priel, 2024. "Improving efficiency in supply chains with a capital-constrained app developer under the agency contract," European Journal of Operational Research, Elsevier, vol. 315(3), pages 991-1005.
    14. Qin, Juanjuan & Fu, Huiping & Wang, Ziping & Xia, Liangjie, 2021. "Financing and carbon emission reduction strategies of capital-constrained manufacturers in E-commerce supply chains," International Journal of Production Economics, Elsevier, vol. 241(C).
    15. Zhixuan Lai & Gaoxiang Lou & Tiantian Zhang & Tijun Fan, 2023. "Financing and coordination strategies for a manufacturer with limited operating and green innovation capital: bank credit financing versus supplier green investment," Annals of Operations Research, Springer, vol. 331(1), pages 85-119, December.
    16. Zhu, Xiaoyan & Cao, Yunzhi & Wu, Jinwei & Liu, He & Bei, Xiaoqiang, 2022. "Optimum operational schedule and accounts receivable financing in a production supply chain considering hierarchical industrial status and uncertain yield," European Journal of Operational Research, Elsevier, vol. 302(3), pages 1142-1154.
    17. Lei Wang & Lin Zhang & Xiaoli Zhang, 2025. "Optimal financing strategies for low‐carbon supply chains: A Stackelberg game perspective," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(1), pages 666-680, January.
    18. Priya, Bhawna & Biswas, Indranil & Agrawal, Anupam, 2023. "The over-ordering problem in trade credit: Role of return policies," European Journal of Operational Research, Elsevier, vol. 309(2), pages 731-744.
    19. Xie, Xiaofeng & Xu, Xun & Zhang, Chong & Zhang, Fengying, 2025. "Enhancing a triple capital-constrained supply chain performance: Alliance financing, profit distribution, and information structure," International Journal of Production Economics, Elsevier, vol. 281(C).
    20. Xiaoli Zhang & Guoyi Xiu & Fakhar Shahzad & Yupeng Duan, 2021. "Optimal Financing Strategy in a Capital-Constrained Supply Chain with Retailer Green Marketing Efforts," Sustainability, MDPI, vol. 13(3), pages 1-19, January.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    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:gam:jsusta:v:17:y:2025:i:15:p:7124-:d:1718647. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    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.