Market Entry Strategies in Sustainable Innovation: A Comparative Study of Profit-Oriented and Environmental, Social, and Governance-Driven Digital Platforms in the Recycling Market

With the rise of sustainable innovation, digital platforms have emerged as key facilitators in the second-hand e-commerce recycling market. This study investigates the entry strategies of profit-oriented and ESG-driven platforms, focusing on their sustainable innovation efforts, entry conditions, and cooperation strategies with recyclers in both monopolistic and duopolistic recycling markets. By developing and analyzing a two-stage Stackelberg model, we derive several key managerial and theoretical insights. First, in a monopolistic market, we delineate the sustainable innovation cost thresholds necessary for platform entry. While both platform types contribute to enhancing recycling volume, consumer surplus, and social welfare, their entry conditions remain mutually exclusive, reflecting their fundamentally different sustainability approaches. A profit-oriented platform can only enter when sustainable innovation costs are low, whereas an ESG-driven platform requires higher levels of innovation investment to balance consumer surplus, environmental benefits, and profitability. Second, in a duopolistic market, we explore three distinct cooperation strategies for profit-oriented and ESG-driven platforms: (1) exclusive cooperation with a low-expertise recycler, (2) exclusive cooperation with a high-expertise recycler, and (3) simultaneous cooperation with both recyclers. We further identify the optimal cooperation strategy based on entry feasibility, profit maximization, and the conditions necessary to achieve a “win-win” outcome. This study sheds light on how profit-oriented and ESG-driven digital platforms strategically enter the recycling market through sustainable innovation, offering insights into their cooperation strategies, market competition, and broader implications for sustainable platform ecosystems.