Production and coopetition strategies in remanufacturing involving knowledge spillovers

Abstract

Knowledge spillovers often occur naturally through remanufacturing in practice. We explore production and coopetition strategies in remanufacturing systems, considering the impact of knowledge spillovers. In the remanufacturing system addressed in this study, a third-party remanufacturer (TPR, he) can potentially remanufacture used products initially produced by an original equipment manufacturer (OEM, she), either in cooperation with her (coopetition scenario) or on his own (competition scenario). Meanwhile, the TPR may also produce and sell his self-branded new products in the same market as the OEM’s products and his own remanufactured products. Regarding this, TPR’s new product cannibalises his and OEM’s market shares. The OEM’s general and innovation knowledge spillovers to the TPR are unavoidable. In examining how knowledge spillovers influence the two firms’ production strategies and decisions, we develop analytical models describing competition and coopetition scenarios. Our results highlight the conditions under which the TPR engages in new product production and ceases remanufacturing in each scenario. Additionally, although innovation knowledge spillover motivates the TPR to engage in new product production and weakens the OEM’s competitiveness, both firms can be better off compared to the competition scenario. Moreover, we point out that coopetition improves consumer surplus and the environment under certain conditions.