Evaluating blockchain technology adoption in multi-tier supply chains from an institutional entrepreneurship theory perspective

The presence of Blockchain Technology (BCT) and its potential supply chain (SC) and logistic benefits—such as improved resilience or lessened disruption—have motivated organizations to consider BCT investment. BCT is a relatively novel technology and requires multiple participants to meet its greatest potential. Its novelty is a barrier to its adoption and can be dependent on an innovator or leader to convince others to invest in or adopt BCT. Using an institutional entrepreneurship theoretical lens, we determine who should lead the investment (adoption) or whether a collaborative investment is best. Insights into this context can be garnered using a sequential game-theoretic model where lead investment roles switch amongst parties. Four scenarios are evaluated and consider full, partial, or no collaboration between SC entities. Within this framework, the two-stage process of adopting and implementing BCT is introduced to separate cost and demand channels. During the adoption stage, a reduction in marginal production cost via positive net benefits of BCT-based transportation and logistics is considered in the cost channel. In the implementation stage, the optimal level of BCT investment is determined, increasing shipping quality for consumers in transportation and logistics and reducing supply chain disruption simultaneously, which is considered in the demand channel. The results show that greater disruption likelihood will boost retail prices, intermediate prices, and profits of SC entities after BCT is adopted. We also find that traditional SCs with higher disruption levels result in lower BCT investment. When a leader in the sequential game (the manufacturer in our model) is the institutional entrepreneur, collaboration in BCT investment becomes more attractive. One important—and counterintuitive—result reveals that when full SC cooperation doesn’t exist, the entire SC is better off when the follower (not the leader) in a sequential game leads BCT adoption. The unique role of reduction in transportation and logistics costs via the cost channel is to compensate for a lower BCT investment due to lack of competition or reinforce a higher BCT investment by counterbalancing opportunistic behaviors.