A Comparative Study on Traditional vs. Blockchain Financing for Deep-Tier Suppliers Considering the Time Value of Capital

Traditional downstream-initiated accounts receivable financing (TF) is often constrained in assisting immediate upstream suppliers. Conversely, blockchain-enabled accounts receivable financing (BF) offers an efficient solution for deep-tier suppliers to bridge capital gaps and ensure smooth production processes. This study constructs a three-level supply chain model comprising a capital-constrained tier-2 supplier, a similarly constrained tier-1 supplier, and an established retailer. To alleviate financial strain among suppliers, we analyze and compare two financing mechanisms: TF and BF. The investigation explores the effects of blockchain adoption and the time value of capital on a multi-tier supply chain. Our findings indicate that while BF typically features a lower interest rate than TF, it may still perform less favorably under certain conditions. Specifically, when the time value of capital for the tier-1 supplier is sufficiently high, the profitability of all supply chain members under BF falls short of that achieved through TF. In other words, adopting blockchain is not universally the best strategy for multilevel supply chains. Additionally, we delineate the impacts of the accounting period and financing rates on the optimal choice of financing model. These insights provide substantial evidence and managerial guidance regarding the appropriate circumstances for blockchain adoption and its interplay with accounts receivable financing.