Technology Investment Strategy for a Competitive Manufacturer in the Presence of Technology Spillover

Motivated by the practices of technology investment in the new energy vehicle manufacturing industry, this article investigates an outsourcing supply chain in which an original brand manufacturer (OBM) possessing the core new energy technology R&D outsources production to a competitive manufacturer (CM). To cater to market demands and increase market competitiveness, the CM may actively invest in technology with the OBM or by himself, or not, i.e., Strategies JI, OI, and NI, respectively. In particular, owing to technology spillover effect, the CM could use the technology inferior to the OBM's to produce his own-branded products in Strategy NI. Our results reveal that the OBM consistently profits the most in Strategy JI. However, the CM's preference strategy is influenced by the competition intensity, technology spillover level, consumers’ product preference, and cost-sharing ratio. In specific, when both the competition intensity and technology spillover are weak or the competition intensity is strong for arbitrary technology spillover level, the CM may prefer Strategy JI or OI depending on consumers’ product preference and cost-sharing ratio and never prefers Strategy NI. However, when the competition intensity is weak but the technology spillover level is strong, the CM may prefer Strategy NI in certain situations. Furthermore, our study extends the model to involve variable production costs, and reveals that the main results derived in the basic model still hold.