The effect of government subsidies on cooperative green innovation of supply chains from the perspective of cost sharing

Purpose This paper aims to explore the effect of different government subsidy decisions and the differences between the consequences of these decisions when supply chain members engage in cooperative green innovation through cost-sharing arrangements. Design/methodology/approach This paper investigates the optimal decisions for green supply chains under two types of subsidies, including subsidies for green innovation research and development (R&D) costs and subsidies for consumers, by integrating game theory with numerical simulation. Findings The optimal R&D cost-sharing ratio is found to be 2/3 for manufacturers and 1/3 for retailers. Under any subsidy policy, the supply chain can achieve maximum total profit. When the supply chain adopts the optimal R&D cost-sharing ratio, subsidies for green innovation R&D costs prove to be the most effective in increasing the supply chain’s profit. However, from the perspective of total social welfare, the analysis reveals that government subsidies to consumers are more beneficial for promoting overall social welfare. Originality/value Previous studies on green supply chain decisions have primarily focused on either government subsidies or corporate cost sharing in isolation. In contrast, this study combines both government subsidies and cost sharing within a unified framework for a more comprehensive analysis. Additionally, this paper examines the impact of government subsidies on supply chain cost-sharing decisions and their effect on overall social welfare while considering the presence of cost sharing and using the combination of theoretical modeling and simulation analysis.