The Manufacturers’ Adoption of Green Manufacturing Under the Government’s Green Subsidy

Wu Chen, Fei Ye () and Yao Qiu
Additional contact information
Wu Chen: Institute of Chinese Financial Studies, Southwestern University of Finance and Economics, Chengdu 611130, China
Fei Ye: School of Management, Chengdu University of Information Technology, Chengdu 610103, China
Yao Qiu: School of Economics and Management, University of Electronic Science and Technology of China, Chengdu 611731, China

Sustainability, 2025, vol. 17, issue 20, 1-27

Abstract: As environmental degradation intensifies, governments increasingly subsidize green manufacturing to promote sustainability. This study develops a game-theoretic model of two competing supply chains, comprising original equipment manufacturers (OEMs) and both traditional and green contract manufacturers (CMs), to investigate the impacts of subsidies on green manufacturing adoption. Specifically, we construct a four-stage dynamic game model to examine the interactions among OEMs, CMs, and the government. The main findings are as follows: First, the government subsidy affects OEMs’ adoption decisions only if the production cost of green manufacturing or competition intensity is sufficiently high or if the market sensitivity to green products is relatively low. Second, the optimal subsidy level depends jointly on the production cost of green manufacturing, competition intensity, and market greenness sensitivity: when the production cost of green manufacturing is low (high), the subsidy should rise (fall) with market greenness sensitivity but fall (rise) with competition intensity. Third, while intensified competition reduces OEMs’ profits and overall supply chain performance, its impact on CMs and consumers depends on the production cost of green manufacturing; in contrast, greater consumer sensitivity to green products yields an all–win outcome for all stakeholders. These results yield important managerial implications. For policymakers, when the production costs of green manufacturing are relatively low, green subsidies should be scaled back as market competition intensifies. For manufacturers, it is critical to carefully evaluate the production costs of green manufacturing and the level of government subsidies and to strategically pursue first-mover advantages in advancing sustainable operations, thereby fostering an all-win outcome for stakeholders.

Keywords: original equipment manufacturers; contract manufacturers; green manufacturing; green subsidy (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/17/20/9028/pdf (application/pdf)
https://www.mdpi.com/2071-1050/17/20/9028/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:17:y:2025:i:20:p:9028-:d:1769362

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().