Product innovation for remanufacturing, beginning at the development stage, has become an important strategic decision in third-party remanufacturing. This study investigates decision-making on product innovation for remanufacturing under two third-party remanufacturing modes and examines how original equipment manufacturers (OEMs) and remanufacturers respond. Results show that outsourcing remanufacturing consistently offers a wider profitability range for the OEM and increases the likelihood of the remanufacturer adopting a full remanufacturing strategy. Furthermore, a higher innovation level enhances OEM profits, particularly when the remanufacturing industry is mature or when the innovation investment efficiency is high. Otherwise, incremental innovation is more beneficial. Innovation also lowers entry barriers for remanufacturers. Finally, the authorization remanufacturing is initially more environmentally friendly, whereas the outsourcing mode becomes superior as the innovation level increases.
Du et al. (Tue,) studied this question.