Blockchain technology adoption strategies of a supply chain considering possible product defects

The adoption of blockchain technology helps to track and trace products in supply chains and enhance consumer trust. This paper considers a three-tier supply chain consisting of a supplier, a manufacturer, and a retailer, within which the supplier and the manufacturer may output defective products unintentionally. The goal is to explore the strategy of adopting blockchain technology for the supply chain considering possible product defects. We obtain three main results. First, counterintuitively, while the adoption of blockchain technology can benefit firms with either high or low product defect rates under certain conditions, firms with low product defect rates will benefit more from adopting blockchain technology than firms with high product defect rates. Moreover, the adoption of blockchain technology can achieve a win-win situation for firms and social welfare. Second, the retailer’s risk-aversion stimulates the supplier and the manufacturer to adopt blockchain technology but hinders the retailer from adopting it. Third, product defects and the retailer’s risk-aversion affect blockchain technology implementation cost sharing among supply chain members in both directions, depending on the retailer’s quality inspection input, consumer traceability awareness, and blockchain efficiency. This study provides useful management insights for practitioners of blockchain technology.