Blockchain Technology for Sustainable Supply Chain Management

Kouhizadeh, Mahtab

Etd

Blockchain Technology for Sustainable Supply Chain Management

Public

Blockchain technology has seen significant growth since its introduction as an underlying platform for the cryptocurrency Bitcoin. Blockchain technology application potential has drawn interest across a variety of fields—including supply chain management. Blockchain digitally records transactions on decentralized and encrypted ledgers. Blockchain capabilities can transform traditional supply chain processes. It can also ease global sustainability concerns such as lack of transparency and provenance, data fabrication, and poor environmental safety. Despite the potential, several barriers and costs impede blockchain adoption for sustainable supply chain management. Using blockchain technology benefits and barriers research, this dissertation develops game theory models to investigate economic behavior of supply chain network entities when it comes to blockchain adoption. These network economic models reflect optimal technology pricing strategies while maximizing platform profit and network participant utility. This approach provides insights into required blockchain technology management in a supply chain setting and for sustainability. While there has been a growing interest on modelling blockchain for supply chain management, the research is still in the initial stages and there is an urgent need for new models and methodological approaches to unveil capabilities. This dissertation introduces network game theory economic models using Nash equilibrium game theory principles through variational inequality formulation resulting in equilibrium conditions for a blockchain-based sustainable supply chain management. These models also highlight the competition among supply chain entities. Two-sided markets and network effect theories further inform model development and advancement, testing and analysis. Various simulations and sensitivity analyses are provided to help understand the models and their associated performance. The findings of this study indicate high level of blockchain transparency can help suppliers attract more customers and demands from the market. In addition, financial incentives and promotions, especially for early adoption, can intensify the network effects and enable diffusion of blockchain in a sustainable supply chain management. However, technological improvements are necessary to reduce the sustainability cost of blockchain operations and maximize the social welfare. Moreover, trust in the technology is a special determining factor and is likely to affect the size of the market and network effect theory for a blockchain-based environment. We also found that blockchain implementation in highly sustainability-oriented markets is a win-win situation. Both users and blockchain platform providers enjoy the benefits of this application. Nevertheless, blockchain technology is not a viable solution for markets with high price sensitivity. Instead, markets with low price sensitivity would benefit from greater blockchain adoption rate. In highly price-sensitive markets, a combination of blockchain and traditional solution provides higher profit to the platform provider. These findings inform the theoretical implications and set the stage for future research. We established a number of research propositions that highlight the economics and diffusion of blockchain for sustainable supply chains. The important managerial aspects of the developed models include identifying how blockchain use diffusion would affect blockchain technology platform value especially in a sustainable supply chain environment.

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