The Research About Innovation Investment Decision Of Supply Chain Based Risk Appetite

Aiming at the market risk and technology risk during the innovation process andbased on the researches both at home and abroad,this paper uses the financial riskmanagement tool—Condition Value at Risk(CVaR)to describe the companies’ riskappetite.This paper not only enriches the researches on the behaviors of therisk-averse company, but also considers the risk-prefer company’s innovationinvestment decision when facing risk, and would provide certain decision-makingreference to the managers in the supply chain. This paper includes a few aspects：（1）We studies innovation investment issues of the supply chain consisting ofthe risk-neutral manufacturer and the risk-aversion retailer. We measure riskpreferences according to the condition value-at-risk (CVaR).The results showed that:the higher the retailer’s risk aversion, the less its investment in innovation; the highrisk-aversion retailer reduce sales result to the supply chain overall revenue decline.We compare the decision-making under centralized supply chain and decentralizedsupply chain. Implementation of the revenue sharing contract, innovation investmentand sales under the decentralized supply chain reached the centralized supply chain’sdecision-making level, and the manufacturer and the retailer expected profitsimproved.（2）We studies innovation investment issues of the supply chain consisting of arisk-neutral supplier and a risk-preference manufacturer. The results show that,Whenthe manufacturer share the responsibility of the supplier’s innovation investment, thesupplier’s investment level as well as the manufacturer’s product quantity will bebetter. One thing to note here is that the investment share proportion must help toincrease the expected revenue of the upstream and downstream members, or it willnot be accepted. With further analysis, it is found that the innovation investment shareproportion dominated by the supplier is higher than that dominated by themanufacturer.（3）On the basis of the risk preferences model which is made according to thecondition value-at-risk (CVaR), We studies the influences that the risk-prefer retailer’innovative decision and information sharing would make on the supply chaincompany’s expected revenue. The results show that, with the retailer’s risk aversion increasing, the retailer’s innovation investment level and the sales will decrease. Butif the retailer shares the risk appetite information with the manufacturer, the retailer’sinnovation investment level and the expected revenue will be increased. But for themanufacturer, realizing the retailer’s risk appetite information does not alwaysincrease its expected revenue, in some situations.（4）We uses the condition value-at-risk (CVaR) to measure the company’s riskappetite, and studies the innovation investment issues of the supply chain consistingof a risk-averse supplier and a risk-neutral manufacturer on the basis of Stackelberggame model.The results show that the increase of the risk aversion degree willgradually decrease the supplier’s innovation investment, when the supplier’s risktolerance degree drops to a certain extent, it will stop the innovationinvestment.Comparing the changes of the business decision before and after the riskinformation sharing, we find that information sharing will help to improve thesupplier’s innovation investment level and increase the expected revenue of both thesupplier and the manufacturer. And it is worth mentioning that the supplier will notstop innovation investment to avoid risk after the risk information sharing.we can alsofind that when the risk aversion degree level increases to a certain extent, thesupplier’s revenue which is obtained from the risk information sharing will decrease.