When Value Co-creation Meets Supplier Encroachment. A Research Based on the Analytical Model

Retailers leverage service investment to enhance competitiveness and counter supplier encroachment. With the evolving relationship between enterprises and consumers, service-oriented value co-creation offers substantial competitive advantages. This paper develops a game-theoretical model to explore the interaction between value co-creation and supplier encroachment. The results show that value co-creation benefits both sides of implementers and serves as an effective strategy for the retailer to resist supplier encroachment. Furthermore, supplier encroachment incentivizes consumers to invest more in co-creation, while the retailer may reduce its own investment if the direct channel gains advantages. Under co-creation, supplier encroachment can benefit the manufacturer, consumers, and the entire supply chain, but Pareto improvement is only achieved when the co-creation environment is effective. This study contributes to the literature by providing a general framework for analyzing co-creation in dual-channel supply chains and expanding research on value co-creation, supplier encroachment, and dual-channel investment.