Strategic peril of sustainable logistics innovations under channel co-opetition

Abstract

Developing sustainable technology innovations has been widely regarded as a promising solution for reducing environmental pollution and emissions in the logistics service supply chain. As consumers become more sustainability-minded, they increasingly prefer sustainable logistics services, prompting logistics service providers (LSPs) to put more effort into developing sustainable logistics. Sustainable logistics strategy enhances LSPs' competitive advantages, especially when competing against a powerful logistics service integrator (LSI) in the service market. However, this pursuit might introduce a strategic peril, where the simultaneous goals of improving economic and environmental performance may be at odds, potentially undermining the profits of LSPs in co-opetitive supply chains. In this paper, we consider a Cournot competition model to study a logistics service provider's (LSP's) decision to develop sustainable logistics while competing with a logistics service integrator (LSI) in logistics service and collaborating with the LSI in cargo canvassing. The LSP's costly effort to develop sustainable logistics can enhance its market competitiveness and reduce pollution per unit of its logistics service. We find that while sustainable logistics can benefit the LSP, its impact on the LSI's profit depends on the canvassing service price charged by the LSI. Notably, if this price is set strategically by the LSI rather than fixed exogenously, the LSI can also benefit from the LSP's sustainable logistics by optimally balancing its logistics and canvassing profits. We show that sustainable logistics may still fail to reduce environmental impact, even under endogenous service pricing. However, we also identify conditions under which economic and environmental sustainability can be coordinated.